Thames Water Crisis: Emergency Takeover Looms Amid Investor Reluctance

TFD – Dive into the unfolding crisis at Thames Water, where an emergency government takeover is imminent due to investor reluctance amidst regulatory demands. This article delves into the critical issues at hand.

The largest water utility in Britain is in danger of an emergency government takeover because investors are unwilling to give it billions more in funding.

The nine shareholders of Thames Water, which serves 15 million people in London and the southeast of England with water and wastewater services, stated in a statement on Thursday that they were “not in a position” to contribute an additional £3.25 billion ($4.1 billion) because the UK water regulator, Ofwat, was putting forth demands that they were unable to meet.

The shareholders declared, “Ofwat has not been prepared to provide the necessary regulatory support for a business plan which ultimately addresses the issues that Thames Water faces, after more than a year of negotiations with the regulator.”

Among its investors are sovereign wealth funds from China and Abu Dhabi, as well as pension funds from the UK and Canada.

Thames Water, beset by debt totaling £14 billion ($17.7 million), announced plans to increase average annual customer bills by 40% by 2030 in its rescue plan, which was released in October.

To avert a government takeover, the utility’s shareholders decided in July to inject a further £750 million ($945 million) into the business by March 2025. By Sunday, March 31, the first £500 million ($630 million) of that amount was due.

The financing was contingent upon the business enhancing customer services and lessening its environmental effect, as well as receiving Ofwat clearance.

The company said in a statement on Thursday that “the regulatory arrangements that would be expected to apply to Thames Water… make the (turnaround plan) uninvestible, based on the feedback provided by Ofwat to Thames Water to date.”

“I’d like to reassure our customers that, despite this announcement, it is business as usual for Thames Water,” said Chris Weston, the company’s chief executive, in the statement.

“Safeguards” were in place to shield customers from Thames Water’s problems, according to an Ofwat representative. “The business must now explore all avenues to secure additional equity in order to improve the company’s performance for customers.”

Jeremy Hunt, the British finance minister, stated on Thursday that Thames Water was being “very carefully” watched by the government, according to Reuters. He reportedly told reporters, “Our understanding is that the company is still solvent.”

Takeover by the government?

Since being sold to private investors in 1989, water businesses in England and Wales have accrued billions of pounds in debt, despite collecting minimal new capital from shareholders and disbursing billions of pounds in dividends.

The indebted utilities have struggled as interest rates have soared over the past two years, and as their aging, leaking infrastructure has required billions of pounds of investment.

Although Thames Water was “a long way from that point,” Weston told the BBC on Thursday that there was a “possibility” that the firm might be placed under special administration, which would essentially put it under temporary public ownership.

He stated, “We are still in a strong financial position with approximately £2.4 billion in cash and undrawn facilities, which should see us through to May 2025.”

Reporting by Olesya Dmitracova was provided.