Thames Water averts nationalisation threat with £750m funding lifeline

Britain’s biggest water firm warned around a further £2.5 billion in funding will be needed by 2030 as it struggles under a £14 billion debt pile.

Thames Water has secured another £750 million in emergency funding from its shareholders (Andrew Matthews/PA) (PA Wire)

Thames Water has secured another £750 million in emergency funding from its shareholders as it seeks to stave off the threat of nationalisation, but warned “significantly” more investment will be needed in future years.

Britain’s biggest water supplier said the initial funding agreement to the end of March 2025 is a “major milestone”, although it is short of the firm’s £1 billion funding goal.

And the troubled utility admitted it will likely need around a further £2.5 billion between 2025 and 2030 as it struggles amid a £14 billion debt pile and is under pressure to spend heavily to tackle sewage releases into UK waterways and seas.

The crisis funding deal comes after weeks of speculation over its financial resilience, with the Government having been on standby to place the firm into a special administration regime, which was the insolvency process used when energy supplier Bulb collapsed in 2021.

It sparked fears over the future of Thames Water, which has 15 million customers and serves households across London and the South East, as well as worries over the balance sheets of firms across the sector.

But Thames Water’s interim co-chief executive, Cathryn Ross, insisted the utility company was “absolutely not” close to being placed into special administration by the Government.

She told BBC Radio 4’s Today programme: “We have a £4.4 billion liquidity pile that we’re sitting on, which means we can access £4.4 billion of cash and credit facilities.

“They’re right there if we need it. That’s absolutely enough to pay everything we think we need to pay this year, next year and into the future.”

She added the Government has a “very high bar” before putting a firm into special administration “and we are not close to it”.

Shares of listed water firms lifted in morning trading on Monday as industry worries receded, with South West Water owner Pennon up 2%, United Utilities ahead 1% and Severn Trent 2% higher.

Thames Water’s newly appointed chairman Ian Marchant said the new deal is “the largest equity support package ever seen in the UK water sector”, adding to £500 million already injected in March this year by its investors.

But Thames Water revealed its shareholder support is dependent on a raft of conditions being met, including a business plan “that underpins a more focused turnround”, as well as “appropriate regulatory arrangements”, suggesting a focus also on how much Ofwat will allow it to raise customer bills.

It added that further support from shareholders for the 2025-2030 period “will depend on the finalisation of the business plan and the regulatory framework that will apply”.

Susannah Streeter, head of money and markets, Hargreaves Lansdown, said: “This is very much an emergency pumping operation, rather than shoring up Thames Water’s finances for the longer term.

“The sum agreed to be paid is less than the £1 billion Thames Water said it initially needed, so there is a shortfall in financial lifeline.

“In addition, the investors will be staring at the huge bill for the infrastructure work needed to mend the leaks and sewage discharges which the company keeps being fined for.”

Thames Water’s annual results also published on Monday laid bare the financial woes at the group, with debts swelling to £14 billion from £12.9 billion the previous year and remaining in the red with underlying pre-tax losses of £82.6 million for the year to March 31.

The group – owned by a consortium of pension funds and sovereign wealth funds – has become a casualty of higher interest rates and inflation, with more than half of its debts linked to the Retail Prices Index. Its financing costs jumped to £700.2 million from £513.3 million the year before.

It has the highest gearing level of all water companies – a key measure of a company’s financial risk – at 77.4%, though it said on Monday that this has eased back from 80% thanks to the £500 million funding it received earlier this year.

Underlying earnings fell 3% to £1.1 billion as inflation sent its costs soaring, but revenues lifted 4% to £2.3 billion.

Thames Water has come under pressure in recent years over its poor performance in tackling leaks and sewage contamination and was fined £3.3 million just last week after sewage was pumped into rivers near Gatwick Airport in 2017.

It has also faced criticism for handing out big rewards to top bosses and shareholders.

Its former chief executive, Sarah Bentley, stepped down abruptly last month amid mounting worries over the financial stability of the company.