Thames Water is in a race to find extra cash after its investors said they would not give the struggling water giant extra cash unless bills rise. The UK’s largest water firm has been pushing for the regulator Ofwat to agree to a substantial increase in water bills over the next five years.
Sources close to Ofwat say it plans to “stick to its guns” and won’t raise bills to address shareholder problems. Fears emerged last year that Thames could collapse due to its huge debts.
Regardless of what happens, water supplies will continue as normal.
Thames Water drew up a turnaround plan last summer which asked for a 40% rise in bills over the next five years. But it is now understood shareholders want to see even higher bill rises as a condition of injecting more money.
Investors were due to pump in almost £4bn into the business over the next two years, but have withheld the first payment – due at the end of March – saying its turnaround plan is “uninvestible”. The government has previously said it is ready to take over Thames Water, which is the UK’s largest water company, in the event that it collapses. It serves 15 million households, mostly across London and parts of southern England.
The regulator insists that even without the additional capital, the Thames Water operating company will not need to be nationalised immediately as it is still generating enough money to keep it going day-to-day for up to 18 months.However, at some point Thames will need to raise new money to finance the huge programme of investment that is needed and if the current shareholders – which include domestic and foreign pension funds as well as wealth funds from China and Abu Dhabi – won’t inject cash, then Thames will need to find new ones.
Sources close to the current owners say that unless Thames can pay a return – few people will find it an attractive investment.
However, it is not unusual for investors to try to put pressure on the regulator, which is in the process of deciding how much water companies will be able to charge customers from 2025 to 2030.
Chris Weston, chief executive of Thames Water, told the BBC he wanted to “reassure our customers that the business continues to operate as usual”. He said the company was “a long way” from nationalisation “at the moment”.
Source: BBC
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