A judge has approved an emergency plan to keep Britain’s largest water company afloat and averted a possible temporary government takeover
Judge approves emergency plan to keep Britain’s largest water company afloatBy BRIAN MELLEYAssociated PressThe Associated PressLONDON
LONDON (AP) — A judge approved an emergency plan Tuesday to keep Britain’s largest water company afloat, averting the possibility of a temporary government takeover.
Thames Water, which serves 16 million customers in and around London, was seeking court approval for about 3 billion pounds ($3.8 billion) in rescue loans to prevent it from being nationalized when it runs out of cash next month.
Justice Thomas Leech ruled in the High Court in London that the company’s restructuring proposal was a better alternative for the public than having Thames Water become insolvent and come under government administration, or a competing plan by a small group of investors.
“There is a public policy in favor of rescuing the Thames Water Group and giving the market a chance to agree a permanent restructuring plan before the government is forced to fund a special administrator,” Leech said.
Without the funding, Thames Water would run out of money next month, which could force the government to temporarily take the reins. Both the government and Thames Water said water would continue flowing to customers regardless of what happens.
The decision was applauded by Thames Water Chairman Adrian Montague as a “significant milestone” to strengthen the company’s finances.
Thames Water has been the focus of criticism from consumers and politicians who say the company was the author of its own misfortune, paying overly generous dividends to investors and high salaries to executives while failing to invest in pipelines, pumps and reservoirs.
Company executives say the fault lies with regulators who kept bills too low for too long, starving the company of the cash it needed to fund improvements.
Thames Water and the water industry have been the subject of nationwide disgust and outrage over rampant sewage spills in rivers and along the coast.
“This national scandal is a disaster for Thames Water billpayers and the environment,” said Charles Watson, chairman of River Action, an environmental group. “Instead of recognizing now is the time for a special administration of Thames Water, the decision saddles customers with the responsibility for funding billions of junk-rated debt while its executives, investors and shareholders escape responsibility.”
Ofwat, which regulates water companies in England and Wales, in December approved a 35% increase in Thames Water’s consumer charges over the next five years. The company argued that bills needed to rise by 53% in order to finance needed projects and provide the financial returns necessary to attract investors.
The company faces massive penalties for sewage discharges, including a fine of more than 100 million pounds ($126 million) by Ofwat in August for failing to manage its wastewater treatment.
Leech had been considering competing proposals to provide credit to the cash-strapped utility — one from Thames Water and a second supported by a smaller group that claimed the company’s plan was too expensive and favored bigger investors. Creditors holding most of the company’s debt backed the company deal.
Leech said the viable alternative wasn’t the so-called Plan B, but a government administration that he said wasn’t as attractive as the company’s plan.
