Thames Water has said its shareholders have agreed to pump another £750 million in funding into the utility giant, but warned that it needs “significant additional funding” in the coming years.
The supplier said the initial funding agreement to the end of March 2025 is a “major milestone,” although it is less than the £1 billion expected.
But the firm said that it needs another £2.5 billion by 2030 for its turnaround to be delivered.
Thames Water, the UK’s biggest water supplier with 15 million customers, is struggling under a £14 billion debt mountain.
Its former chief executive, Sarah Bentley, stepped down abruptly last month amid mounting worries over the financial stability of the company.
There have been suggestions that re-nationalisation may be a solution, and the government has reportedly been working on contingency plans in recent weeks to place the firm into a special administration regime if needed.
But the government has tried to calm the waters by saying the utility has “secure and committed” funding and reassuring customers their supply will not be interrupted.
Under Pressure
Thames Water has come under pressure in recent years over its poor performance in tackling leaks and sewage contamination, while facing criticism for handing out big rewards to top bosses and shareholders.
According to annual results published on Monday, the group’s debts swelled to £14 billion from £12.9 billion the previous year.
Commenting on the investors’ new funding pledge, interim co-chief executives Cathryn Ross and Alastair Cochran said: “This announcement is a major milestone for Thames and all our stakeholders.
“The substantial equity support package announced today will underpin the delivery of a more focused turnaround plan that builds on the foundations that have been put in place over the last two years.”
Thames Water chairman Ian Marchant said the new deal is “the largest equity support package ever seen in the UK water sector.”
But the company’s shareholders—a consortium of pension funds and sovereign wealth funds—have said the cash is dependent on “the preparation of a business plan that underpins a more focused turnaround that delivers targeted performance improvements for customers, the environment and other stakeholders over the next three years and is supported by appropriate regulatory arrangements.”
Nationalisation?
The company denied that it is close to being placed into special administration by the government.
Ms. Ross, one of the interim co-chief executives, said the group still “have £4.4 billion of capital sitting there.”
She told BBC Radio 4’s “Today” programme that a special administration regime is “an option the government has, but it has a very high bar,” which she said the group is “not close to it.”
Lord Michael Howard, one of the architects of water privatisation, rejected suggestions that a return to public ownership is a viable solution.
He told BBC Radio 4’s “Today” programme on July 1:
“The point about public ownership is this: if you have the industry in the public ownership it has to compete for resources with health, with education, with the police, with all the other legitimate demands on the public purse, and water when it was in public ownership was way down the queue.
“When you release it into the private sector you have recourse to private capital. You can make the investment that’s needed.”
Lord Andrew Tyrie, the former chair of the Competition and Markets Authority, also said it would be a mistake to renationalise water companies.
He told BBC Radio 4’s “Week in Westminster”: “I think that would be a mistake. I think we’re better off having them in the private sector subject to some discipline in the market.
He said nationalisation would be “extremely disruptive” and would lead to higher water bills over a sustained period.
