by Jonathan Margolis at Air Mail: Players of the property-dealing board game Monopoly have never greatly loved the utilities—the water and electric companies, which sit dour and gray among the more colorful Park Place–type investment opportunities. Ambitious players consider the utility companies boring and worthless, even if a few steadier, less flashy contestants regard them as surprisingly O.K. investments that pay modest dividends.
In real life, though, utility companies—those that deal in water in particular—are potentially terrific financial assets. Literally everyone needs water, and the infrastructure for getting it to people’s taps is so cumbersome that supplying the stuff lends itself to an actual monopoly.
Indeed, one of the most profitable businesses of all time was a private water company in London. In 1613, an entrepreneur was granted exclusive permission to build a 40-mile canal, called the New River, to bring water from the countryside north of London and distribute it through the city in pipes.
Nearly 300 years later, in 1904, when London’s water supply was compulsorily bought into public ownership, a share in the New River Company that had been purchased in 1613 would have earned an average annual yield of 267 percent, plus a 232-fold increase in each share’s value, making it an investment that vastly outstripped inflation, gold, and even London property.
Today, over 400 years since the New River was built, incredibly, it still supplies 10 percent of London’s water. Most of the rest is extracted from the River Thames and from boreholes that suck former rainwater up from the chalk aquifers that lie under 300 feet or so of claggy, impermeable London clay.
Yet, shockingly, the task of piping water to London’s nine million people and removing their sewage has lost its sparkle to such an extent that Thames Water, the private company that was given the supply monopoly by Margaret Thatcher’s government in 1989, is $20 billion in debt and on the point of going bankrupt. Authoritative figures across the political spectrum say it has been ravaged by corporate greed—this in spite of the company being, in theory, meticulously regulated by a government oversight body.
More here.
