Thames Water shareholders pull investment plan
The Reading based company faces new financial crisis
Last updated 2nd Apr 2024
Troubled utility Thames Water has said its shareholders will not be injecting the first £500 million of funding that was agreed last summer into the group as industry regulations make its business plan "uninvestible".
Thames Water - the UK's biggest water supplier with 15 million households across London and the South East - said the funding plan drawn up last July was subject to conditions, including a business plan that is supported by "appropriate regulatory arrangements".
It said the regulations being imposed by industry watchdog Ofwat "make the PR24 plan "uninvestible", and as a result the shareholder support letter from last July "has not been satisfied".
"The first £500 million of the new equity that had been anticipated will not be provided by Thames Water's shareholders by 31 March 2024," it revealed.
Thames Water said it was in ongoing talks with industry regulator Ofwat to secure regulations that are "affordable for customers, deliverable and financeable for Thames Water, as well as investible for equity investors".
It said once the new regulatory plan is agreed with Ofwat, it "intends to pursue all options to secure the required equity investment from new or existing shareholders".
Thames Water has been battling to secure its future since last summer, with a funding crisis leaving the debt-laden firm on the brink of emergency nationalisation.
Last July, it agreed a rescue funding plan with shareholders - including the Universities Superannuation Scheme (USS), China's sovereign wealth fund, a Canadian pension fund and the BT Pension Scheme - that would see them pump in £750 million, with the first £500 million due by the end of this month.
But it is understood that Ofwat has refused to bow to the water giant's demands for concessions, said to include a 40% bill hike for customers, an easing of capital spending requirements as well as leniency on regulatory penalties.
Chris Weston, chief executive of Thames Water, said: "I'd like to reassure our customers that, despite this announcement, it is business as usual for Thames Water.
"Our 8,000 staff remain committed to working with our partners in the supply chain to provide our services for the benefit of our customers, communities and the environment."
Regulator Ofwat said Thames Water must now seek further funding for its turnaround plan, but sought to assure that "safeguards" were in place to protect services to households.
An Ofwat spokesman said: "Safeguards are in place to ensure that services to customers are protected regardless of issues faced by shareholders of Thames Water.
"Today's update from Thames Water means the company must now pursue all options to seek further equity for the business to turn around the performance of the company for customers."
He added: "Thames Water is a business with a regulatory capital value of £19 billion, with £2.4 billion of cash/liquidity available, and an annual regulated revenue of £2 billon and new leadership team."
The Treasury will monitor Thames Water's situation "very carefully", Jeremy Hunt said.
Asked by broadcasters if the Government was ready to step in to support Thames Water customers if necessary, the Chancellor said: "The Treasury will continue to monitor very carefully what is happening at Thames Water.
"Our understanding is that the company is still solvent and today's news should not have an impact on the services received by customers.
"Obviously there are parts of the country where the service has not been up to scratch, including in my own constituency, and local MPs will continue to hold Thames Water to account in those situations, but overall we will continue to watch the situation very carefully."
Labour urged the Government and regulators to "do everything in their power to stabilise" Thames Water after its shareholders pulled an investment plan.
Steve Reed, the shadow environment secretary, said: "The Conservatives weakened regulation, allowing water companies to get massively in debt while the sewage system crumbled and illegal sewage dumping hit record levels.
"The Conservatives' negligence is why the country's largest water company is now in this worrying position.
"The Government and regulators must do everything in their power to stabilise the company and ensure new investment comes through to fix the broken sewage system without taxpayers being left to foot the bill.
"Labour will strengthen the regulator's powers and make financial stability a priority to prevent this situation from happening again."