The evolution of infrastructure and utility ownership and its implications

Dieter Helm and Tom Tindall

Oxford Review of Economic Policy, 2009, vol. 25, issue 3, 411-434

Abstract: The paper documents the significant changes of ownership since the infrastructure utilities were privatized and, in particular, the shifts from the initial focus on dispersed retail share ownership through takeovers to more concentrated ownership and the emergence of private equity and infrastructure funds. In the process, there has been substantial financial engineering and balance sheets have been geared up towards exhaustion, with major implications for financing future investment. Increased gearing has, on the one hand, introduced the discipline of debt upon management which had engaged in substantive diversification, and on the other provided an arbitrage between the weighted average cost of capital used to calculate the allowed return, and the lower marginal cost of debt. The paper shows how regulation has determined the allocation of risk, and facilitated the observed changes in ownership and financial structures. Three solutions to the exhausted balance sheets are considered to finance future investment: rate-of-return regulation; the split cost of capital; and a collapse back into not-for-dividend, mutual or state ownership. The default outcome already witnessed in the Welsh Water and Network Rail cases is the latter case, which is inferior to the second option. Copyright 2009, Oxford University Press.

Date: 2009
References: Add references at CitEc
Citations: View citations in EconPapers (17)

Downloads: (external link)
http://hdl.handle.net/10.1093/oxrep/grp025 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:oxford:v:25:y:2009:i:3:p:411-434

Access Statistics for this article

Oxford Review of Economic Policy is currently edited by Christopher Adam

More articles in Oxford Review of Economic Policy from Oxford University Press and Oxford Review of Economic Policy Limited
Bibliographic data for series maintained by Oxford University Press ().