Thames Water agrees 750m funding deal but warns significantly more needed

Thames Water has said its shareholders have agreed to pump another £750 million in funding into the utility giant, but warned that another £2.5 billion will be needed by 2030 as it struggles under a £14 billion debt mountain.

The supplier said the initial funding agreement to the end of March 2025 is a “major milestone”, although it is less than the £1 billion expected, and the group admitted that “significantly” greater support will be needed in following years for its turnaround to be delivered.

It said any further support from shareholders for the 2025-2030 period “will depend on the finalisation of the business plan and the regulatory framework that will apply”.

Thames Water’s latest funding deal comes as the group battles to stave off nationalisation, with the Government working on contingency plans in recent weeks to place the firm into a special administration regime if needed, which was the insolvency process used when energy supplier Bulb collapsed in 2021.

Thames Water is the UK’s biggest water supplier with 15 million customers, serving households across London and the South East.

The group’s interim co-chief executive, Cathryn Ross, insisted the utility company was “absolutely not” close to being placed into special administration by the Government.

She told BBC Radio 4’s Today programme: “We have a £4.4 billion liquidity pile that we’re sitting on, which means we can access £4.4 billion of cash and credit facilities.

“They’re right there if we need it. That’s absolutely enough to pay everything we think we need to pay this year, next year and into the future.”

She added the Government has a “very high bar” before putting a firm into special administration “and we are not close to it”.

Thames Water’s annual results also published on Monday laid bare the financial woes at the group, with debts swelling to £14 billion from £12.9 billion the previous year and remaining in the red with underlying pre-tax losses of £82.6 million for the year to March 31.

Interim co-chief executives Ms Ross and Alastair Cochran said: “This announcement is a major milestone for Thames and all our stakeholders.

“The substantial equity support package announced today will underpin the delivery of a more focused turnaround plan that builds on the foundations that have been put in place over the last two years.”

The funding secured adds to £500 million already injected in March this year by its investors.

Thames Water chairman Ian Marchant said the new deal is “the largest equity support package ever seen in the UK water sector”.

But the company’s shareholders – a consortium of pension funds and sovereign wealth funds – have said the cash is dependent on “the preparation of a business plan that underpins a more focused turnaround that delivers targeted performance improvements for customers, the environment and other stakeholders over the next three years and is supported by appropriate regulatory arrangements”.

Thames Water has come under pressure in recent years over its poor performance in tackling leaks and sewage contamination, while facing criticism for handing out big rewards to top bosses and shareholders.

Its former chief executive, Sarah Bentley, stepped down abruptly last month amid mounting worries over the financial stability of the company.

The group reiterated that it has £4.4 billion of cash and committed funding.

However, it has the highest gearing level of all water companies – a key measure of a company’s financial risk – though it said on Monday that this has eased back to its lowest level in 10 years.

It stressed it will “carefully monitor” its progress on meeting conditions for the shareholder support and “keep under review pathways to ensure Thames Water’s continued financial resilience”.

“In the meantime, Thames Water remains focused on delivering a safe and reliable service to its customers and the environment while work continues on implementing and accelerating the turnaround,” it said.

Published: 10/07/2023 by Radio NewsHub