Thames Water working to secure cash as Government draws up nationalisation plan

The debt-laden utility giant said on Wednesday that it needs ‘further equity funding’ on top of the £500m it raised from shareholders in March.

Utility giant Thames Water has billions of pounds of debt (Andrew Matthews/PA) (PA Archive)

Debt-laden utility giant Thames Water has said it is working with shareholders to secure the cash it needs after reports that ministers are drawing up contingency plans for its collapse.

The company, which serves 15 million households, said on Wednesday that it needs “further equity funding” on top of the half-billion pounds it raised just three months ago.

It comes as Thames Water tries to fend off collapse, and ministers are weighing up whether to nationalise the business should it fail.

The business said in a statement: “Thames Water received the expected £500 million of new funding from its shareholders in March 2023 and is continuing to work constructively with its shareholders in relation to the further equity funding expected to be required to support Thames Water’s turnaround and investment plans.

“Ofwat is being kept fully informed on progress of the company’s turnaround and engagement with shareholders.”

Water regulator Ofwat, the Department for Environment, Food and Rural Affairs (Defra) and the Treasury are understood to be meeting to consider the future of Thames Water.

If pushed, they could be forced to place the company under a so-called special administration regime.

An SAR is used only in extreme circumstances when a company in a vital sector such as water or energy is too big to fail.

It has only ever been used once before – when Bulb Energy collapsed in November 2021.

In a statement following the news, Ofwat said it is in talks with Thames Water about developing a “robust and credible plan”.

“We monitor the financial position of all the key water and wastewater companies,” a spokesman said on Wednesday.

“We have been in ongoing discussions with Thames Water on the need for a robust and credible plan to turn the business around and transform its performance for customers and the environment.

“We will continue to focus on protecting customers’ interests.”

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

Thames Water is the UK’s biggest water supplier and provides water services for 15 million customers in London and the South East.

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.

A Government spokesman said: “This is a matter for the company and its shareholders.

“We prepare for a range of scenarios across our regulated industries – including water – as any responsible government would.

“The sector as a whole is financially resilient. Ofwat continues to monitor the financial position of all the key water and wastewater companies.”

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.

Ms Bentley, who was appointed in 2020, said in May that she would give up her bonus after the company’s environmental and customer performance suffered.

But, even after giving up the bonus, the chief executive managed to double her pay, raking in £1.5 million.

On announcing her departure, she said: “The foundations of the turnaround that we have laid position the company for future success to improve service for customers and environmental performance.”

Whatever the situation is at Thames Water, the water will continue to flow

Work and Pensions Secretary Mel Stride

Thames Water’s owners last year invested £500 million in the firm – the first injection of equity into the group since privatisation.

They pledged a further £1 billion, subject to conditions, and warned that “further shareholder support may be required”.

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.

Ofwat warned last December over the financial resilience of Thames Water, as well as Yorkshire Water, SES Water and Portsmouth Water.

Work and Pensions Secretary Mel Stride said he is confident that “whatever the situation is at Thames Water, the water will continue to flow”.