Ministers work up Thames Water plan as regulator keeps watch on sector debts

Thames Water is seeking to raise cash from investors as it struggles under a £14 billion debt pile.

The water regulator has said it has been clear about Thames Water’s ‘significant issues’ (Andrew Matthews/PA) (PA Archive)

Ministers have looked to allay fears around the impact of Thames Water potentially going under as the regulator vowed to work with the sector to deal with its debt levels.

Work and Pensions Secretary Mel Stride said there were “contingency plans in place for any eventuality” as Thames Water battles to finance the £14 billion of debt on its books following interest rate rises.

It comes as several reports suggested concerns about Thames Water’s finances had now broadened to other firms in the industry.

The Times cited a Whitehall source as saying: “A lot of these companies are highly geared and struggling.

“There is a worst case scenario where other companies end up in the same place as Thames Water.”

The Government has contingency measures for exactly the kind of circumstances that may play out here yet to be seen

Work and Pensions Secretary Mel Stride

A Government source pointed out that industry regulator Ofwat raised the issue in December in its 2021/22 Monitoring Financial Resilience report, with Thames Water, Southern, Yorkshire, SES and Portsmouth mentioned.

Thames Water is seeking to raise cash from investors as it struggles under a £14 billion debt pile, with the Government said to be laying the groundwork for the firm’s emergency nationalisation.

The utility giant is the UK’s biggest water supplier, serving people across London and the South East.

In a statement on Wednesday evening, Ofwat said it has been “clear that Thames Water has significant issues to address” and that it needed to “improve their financial resilience”.

But the watchdog said the water sector remained an attractive investment opportunity.

A spokesman said: “Ofwat will continue to keep companies’ financial resilience under close scrutiny and work with companies to ensure they take action to ensure that they have the financial backing to deliver for customers and the environment.”

Senior Conservative Cabinet minister Mr Stride told Sky News’ The Take With Sophy Ridge programme that he could not comment on the “financial position of a private company” when asked about Thames Water’s position.

But he said that “water will continue to flow” whatever the outcome.

“The Government has contingency measures for exactly the kind of circumstances that may play out here yet to be seen. And that’s basically where we are with it,” he added.

On Channel 4 News, Mr Stride, a former Treasury minister, said he “disagreed” with a suggestion that water privatisation had not worked in the country’s financial interest.

“I don’t think it has been an absolute disaster,” he told the broadcaster.

Thames Water, having confirmed it is working with shareholders to secure the cash it needs, has said it requires “further equity funding” on top of the £500 million it raised just three months ago.

On Tuesday, Thames Water chief executive Sarah Bentley stepped down with immediate effect amid mounting worries over the financial stability of the company.

The firm is now reportedly racing to raise £1 billion from investors to shore up its finances, with AlixPartners said to be advising the firm on turnaround plans.

Thames Water – owned by a consortium of pension funds and sovereign wealth funds – 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.

The group’s shareholders include Chinese sovereign wealth fund China Investment Corporation, UK private pension fund the Universities Superannuation Scheme, and Abu Dhabi Investment Authority subsidiary Infinity Investments.