Thames Water shareholders urge bill rise and cut off funding

‘Shareholders are not in a position to provide further funding to Thames Water’

THE owners of Thames Water have refused to provide a £500m cash injection to prevent its collapse as they renew demands for household bills to increase by 40pc.

A consortium of pension funds and foreign states yesterday announced they would stop funding the company and accused Ofwat, the regulator, of rendering it “uninvestable”.

They had previously committed to providing £500m to the company before the end of this month, as part of an overall £3.75bn funding package through to 2030. But their latest move stoked fears that Thames, which supplies a quarter of British homes, may now have to be renationalised at a potential £5bn cost to taxpayers.

Jeremy Hunt, the Chancellor, said the Treasury was monitoring the situation but insisted the company was “still solvent”, while Thames executives stressed there was no threat to water supplies.

The crisis has erupted as Ofwat is considering the company’s business plan for 2025 to 2030, including a controversial proposal to raise bills by an average of almost £200 per household. Thames says the increase is essential to cover its operational costs, pay for infrastructure upgrades to reduce storm overflows and generate sufficient returns for its investors.

The company, which has an £18bn debt mountain and is one of the country’s most complained-about suppliers, is also demanding the freedom to pay investor dividends again and wants Ofwat to reduce the fines it pays for sewage spills. But yesterday it emerged that talks with the regulator had broken down, with Thames and its investors saying Ofwat was pushing back against its demand for higher bills. The regulator is understood to be “sticking to its guns” and has told the company that consumers should not foot the bill for the company’s “financial engineering”.

It leaves the company and the watchdog locked in a stand-off, with Ofwat expected to issue a draft decision on Thames Water’s plans at the end of May.

Without further funding from investors, bosses said Thames Water’s operating company had enough cash or borrowing facilities to survive until about May 2025, but would need to raise further debt or equity to avoid collapse.

That looked like a dim prospect yesterday, however, as a bond linked to an entity in Thames’s complex structure nearly halved in value to just 16p in the pound. The IOUS, which mature in 2026, were worth as much as 87p six months earlier.

However, Chris Weston, Thames Water’s chief executive, claimed it remained “business as usual” and rejected suggestions that the company was on the verge of failing. He said: “There’s still a lot of water to go under the bridge.” The row with Ofwat is thought to centre on a refusal by the regulator to countenance a 40pc rise in bills proposed by Thames. That would see the amount paid per household rise from an average of £436 a year to £609.

If the company fails, the Government has said it would be placed into “special administration”. Ministers have said they will not interfere in the talks, pointing out that Ofwat is independent.

But a source close to Steve Barclay, the Environment Secretary, added: “We certainly don’t think customers would think it is acceptable for there to be an easing of the regulatory regime because of this company’s demands.” Thames Water’s nine investors include the Universities Superannuation Scheme, the Canadian teachers’ pension fund Omers, and sovereign wealth funds linked to China and Abu Dhabi.

In a joint statement, they said: “After more than a year of negotiations with the regulator, Ofwat has not been prepared to provide the necessary regulatory support for a business plan which ultimately addresses the issues that Thames Water faces. As a result, shareholders are not in a position to provide further funding to Thames Water.

“Shareholders will work constructively with Thames Water, Ofwat and government on how to address the consequences of Ofwat’s decision.”

A spokesman for Ofwat said: “Thames Water must now pursue all options to seek further equity for the business to turn around the performance of the company for customers.”