Taxpayers MUST not face £18bn water bail out, warn ministers
MINISTERS yesterday warned ‘arrogant’ Thames Water bosses that taxpayers must not be left to foot a multi-billion-pound bailout bill as a cash crisis engulfed Britain’s biggest water firm.
After shareholders yesterday refused to hand over £750million amid a stand-off with the regulator, the debt-laden utility warned it needed to hike bills for its 15 million customers by 40 per cent.
But if it cannot raise new funding, Thames could be nationalised or need a public cash injection to survive, both of which the Government are loath to do.
In a furious attack, Michael Gove insisted the firm must ‘carry the can’ for years of ‘serial mismanagement’ that had left it £18billion in debt.
The Communities Secretary said it was a ‘disgrace’ the utility had been ‘taking out profits and not investing as they should have been’.
He added: ‘In my own constituency, I’ve seen how they’ve behaved in a highhanded and arrogant way towards the consumers who pay their bills.’
Amid calls for the Government to step in, Chancellor Jeremy Hunt yesterday said the Treasury would ‘watch the situation very carefully’.
After a tense meeting on Wednesday night, Thames Water yesterday morning confirmed that its shareholders had pulled a promised £750million funding lifeline saying the company had become ‘uninvestible’.
Shareholders, which include UK and Canadian pension schemes and Chinese and Abu Dhabi sovereign wealth funds, were due to hand over £500million by the end of this month – the first payment of £4billion due to be pumped into the business over the next two years.
But the payout was dependent on industry regulator Ofwat approving Thames Water’s turnaround plan – including a huge increase in customer bills. Ofwat blocked the hike and refused to ease capital spending requirements and waive fines for failing to meet targets.
The utility, which provides water across the South-East of England, is racing to secure funding from new or existing shareholders. Ofwat said it ‘must now pursue all options to seek further equity’.
But the Government could take ownership of Thames Water through a special administration if funding is not secured before the end of next year.
Ofwat and Thames Water stressed that customer service will not be affected for now. The firm has £2.4billion in cash to continue trading for the next 18 months.
Chief executive Chris Weston told the BBC yesterday that special administration was ‘a long way off’. There is ‘a lot that has to happen’ beforehand but he said it was ‘eventually possible’.
He added: ‘The plans that we have put forward require an investment of around £20billion in the 2025-2030 period, and that would result in a bill (increase) of around 40 per cent.’
A source close to Environment Secretary Steve Barclay told the Mail: ‘Steve’s view is that this is a matter for the company and the regulator to sort out. There’s clearly scope for the company to raise some money from shareholders or money markets.’
The source added: ‘Don’t rule out special administration but we’re nowhere near that at the moment.’
Lord Sikka, an accounting professor, said: ‘The chief executive of Thames Water
‘Company must carry the can’
has refused to rule out 40 per cent bill increases for customers. This is a con. Customers, not shareholders, will provide capital and own absolutely nothing in return. Current shareholders will get dividends, customers big bills.’
The utility was plunged into crisis when former chief executive Sarah Bentley abruptly quit in June after three years in the job as fears mounted over its financial stability.
A Government spokesman said: ‘We prepare for a range of scenarios across our regulated industries – including water – as any responsible government would.’