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The UK authorities is on standby for the potential collapse of Thames Water and ministers are analyzing choices together with the non permanent nationalisation of the debt-laden enterprise.
Defra, the atmosphere ministry, is holding emergency talks with trade regulator Ofwat to look at contingency plans in case the nation’s largest water firm is unable to lift personal finance within the coming weeks, in accordance with authorities officers.
The prospect of non permanent nationalisation despatched the worth of a 2026 bond offered by Kemble Water Holdings, Thames Water’s father or mother firm, plunging by as a lot as 35 pence to 50p, into distressed territory.
One choice is putting Thames Water, the largest water firm within the UK, right into a particular administration regime (SAR), they mentioned. The SAR course of, which was launched in 2011 and would in impact imply public possession, was first utilized in 2021 for the non permanent rescue of vitality provider Bulb; the corporate has since been offered on by the federal government to Octopus Vitality.
“Defra and Ofwat are planning for all eventualities,” mentioned one authorities official.
One other mentioned: “Theoretically, the corporate might find yourself in SAR however I want to emphasize that that is very a lot a contingency plan slightly than a most well-liked end result.”
Thames Water is owned by a bunch of personal fairness, pension and infrastructure funds and has £14bn of money owed. Its largest shareholder is Ontario Municipal Workers Retirement System, with a 31 per cent stake. Different buyers embody UK pension fund Universities Superannuation Scheme in addition to the Chinese language and Abu Dhabi sovereign wealth funds and infrastructure fund Aquila GP.
On Wednesday, Thames Water mentioned that it’s working “constructively” with its shareholders over injecting extra fairness into the corporate to help its “turnaround and funding plans.”
The shareholders final yr invested £500mn within the firm — the primary fairness injection since privatisation — and pledged an additional £1bn topic to situations.
The contingency planning from the federal government and regulators come a day after Thames Water’s chief govt Sarah Bentley resigned with fast impact after simply three years within the job. She was within the second yr of an eight-year turnround plan to deal with leakage and scale back sewage outflows into rivers, a legacy of under-investment in infrastructure.
However the firm, which primarily serves London and the south-east of England, was struggling to make progress and a freedom of data request launched this week revealed the leakage price from Thames Water pipes was the very best in 5 years.
A Defra official mentioned the ministry was “continually” updating present laws “to verify it’s match for goal”, including: “We do it as a matter in fact and you’d criticise us if we didn’t, we have to plan for each eventuality.”
A authorities spokesperson mentioned: “This can be a matter for the corporate and its shareholders. We put together for a variety of eventualities throughout our regulated industries — together with water — as any accountable authorities would.”
They added: “The sector as a complete is financially resilient. Ofwat continues to observe the monetary place of all the important thing water and wastewater corporations.”
Ofwat didn’t instantly reply to a request for remark. Contingency talks had been first reported by Sky Information.
After being offered with virtually no debt at privatisation three many years in the past, UK water corporations have taken on borrowings of £60.6bn, diverting earnings from buyer payments to pay curiosity funds.
Your entire sector is now below strain from rising inflation, together with hovering vitality and chemical costs and better curiosity funds on its money owed. S&P, the ranking company, has adverse outlooks for two-thirds of the UK water corporations it charges — indicating the potential of downgrades as the results of weaker monetary resilience. Greater than half of the sector’s debt on common is inflation-linked, placing strain on corporations within the present atmosphere.
Ofwat mentioned in December that it was involved concerning the monetary resilience of a number of water corporations: Thames Water, Yorkshire Water, SES Water and Portsmouth Water.
In 2021 Southern Water, which serves 4.2mn clients throughout Kent, Sussex and Hampshire, was rescued from the brink of chapter after Australian infrastructure investor Macquarie agreed to take management of the corporate in 2021 in a non-public cope with Ofwat.