Regulator warns Thames Water must ‘address shortcomings’ as debt spirals to £18bn
Thames Water has been told to “address their operational shortcomings and strengthen their financial resilience” by the regulator after it emerged its owners had piled more debt on the water firm.
Britain’s biggest water firm faces fresh questions over its stability after a report in the FT showed its owners had injected half a billion pounds of cash, but structured it as a loan at eight per cent interest.
Thames Water’s ultimate owners, companies owned by the governments of Kuwait, Abu Dhabi and China as well as a Canadian pension scheme and a UK universities pension scheme, funded Kemble Water, the unregulated holding company of Thames Water, with a £500m booster in March. The cash injection was, at the time, called “new equity funding.”
However, the FT has argued this label was misleading as the new money actually came in the form of a convertible loan.
Thames Water pointed towards its recent annual report which showed the. It also highlighted the Kemble report, which outlined the
The FT report has reignited concerns about the complicated structure of the company as well as its performance. It has been suffering under a mammoth debt pile, with the government considering partial nationalisation in case of collapse.
Thames Water provides 25 per cent of the UK’s supplies, including London, and has faced mounting criticism over leaks and sewage discharge from its network.
Last month, it was announced Thames Water will be forced to pay £73.7m back to customers for failing to meet performance targets around reducing pollution, leakage and supply interruptions.
In October, Ofwat said the firm had ‘significant issues’ to address
According to the FT, the £500m debt bump pushed Thames Water’s overall borrowing to £18bn. This has only added to concerns about its financial stability and long-term future as a private firm.
The debt-laden firm has announced almost 200 redundancies in the last few months, just ahead of Christmas. It is also seeking to increase customer bills substantially by the end of the decade, in a bid to cut down its debt.
An Ofwat spokesperson said: “Thames Water must address their operational shortcomings and strengthen their financial resilience.”
“The recent injection of £500m new equity into the business is welcome in that regard. All dividends paid by the regulated company must be declared in accordance with company law and the terms of their licence.”
“We have new powers to take enforcement action against companies that break the rules.”
A Thames Water spokesperson said: “We are extremely fortunate to have such supportive shareholders. Their commitment to delivering Thames’ turnaround and life’s essential service is reflected in the largest shareholder support package ever proposed in the UK water sector, whilst taking no dividends out.”
“An initial £500 million of shareholder funding was drawn on 30 March 2023 and shareholders have agreed to provide a further £750 million of funding.., subject to satisfaction of certain conditions. Our audited 2022/2023 annual report and accounts record that £500 million was invested by shareholders into the business.”