When a government-backed agency known for prudence ends up selling loans at a “deep discount,” something has gone very wrong. Export Development Canada (EDC), created in 1944 to help Canadian companies break into foreign markets, now finds itself nursing heavy losses after lending as much as C$1.45 billion to the troubled UK utility Thames Water.
This isn’t just a bad investment; it’s a cautionary tale about how public institutions can be swept up in private-market optimism. Thames Water, long burdened by debt from successive owners, is on the brink of collapse. Its own regulator warns it may run out of cash by next June. The Canadian pension fund Omers, which held a 31 percent stake, already wrote its investment down to zero in May. Yet between 2018 and 2022 well after concerns about the company’s mounting debt were public EDC extended five loans to the utility.
EDC defends the decision by pointing to its mandate: fostering opportunities for Canadian exporters. According to the agency, its relationship with Thames Water introduced more than 30 Canadian cleantech firms to the UK utility’s supply chain. That sounds admirable, but it’s hard to imagine those introductions outweighing the likely loss of hundreds of millions of taxpayer-backed dollars.
The larger problem is moral hazard. When a state-owned lender chases deals alongside private investors, the risk is quietly socialized while the potential upside remains private. If those bets go bad as they clearly did here the cost falls on Canadian taxpayers and on the credibility of EDC’s mission.
There’s nothing wrong with supporting Canadian exporters. But lending vast sums to a foreign utility whose financial troubles were hardly a secret looks less like strategy and more like wishful thinking. Ottawa should demand a full accounting of how these decisions were made and tighten oversight to ensure EDC’s future loans meet a higher standard of due diligence.
Thames Water’s pipes may be leaking, but it’s Canadian public confidence that risks draining away if lessons aren’t learned.
