The fate of Thames Water, the UK’s largest water utility serving 16 million customers, hangs in the balance as the company grapples with a staggering £15 billion debt pile. With the specter of bankruptcy looming, the British government is now making contingency plans for a potential collapse, reaching out to restructuring advisers who could step in as special administrators to keep the taps running.
Thames Water Seeks Lifeline
In a desperate bid to stave off imminent collapse, Thames Water is seeking emergency funding to the tune of £3 billion, plus an additional £3.25 billion in equity investment down the line. The London high court will decide in February if the company can proceed with this £3 billion plan, which has the backing of 90% of one group of existing creditors.
The clock is ticking for Thames Water, with a deadline of February 18th to decide whether to appeal to the Competition and Markets Authority against a limit on bill increases imposed by the sector regulator, Ofwat. The regulator announced before Christmas that Thames Water could raise bills by 35% by 2030, but the company insists this is not enough to return it to a sustainable footing.
Public Anger Overflows
Thames Water has found itself in hot water with the public over widespread disgust at the discharge of sewage into rivers and seas. The company was also hit with an £18.2 million fine in December for paying “unjustified” dividends, even as it sought to raise more cash after previous investors wrote down their stakes to zero.
The possibility of temporary nationalization is the “strongest lever that we as government can have to make sure that another market-led, private-led solution is found”.
– Unnamed government official
Government Readies for Worst-Case Scenario
With the threat of bankruptcy rising, the UK government is taking no chances. It has reportedly approached multiple restructuring advisers, including Teneo, Interpath, and EY, for the role of special administrator under a so-called Special Administration Regime (SAR). This would see Thames Water taken into temporary public ownership to ensure vital water services continue uninterrupted.
An unnamed government official was quoted as saying they are “ready now” for special administration “if we had to”. The prospect of nationalization, even on an interim basis, is being wielded as a “strong lever” to push for a private sector solution to Thames Water’s woes.
Key Takeaways
- Thames Water teetering on edge of bankruptcy with £15bn debt
- Company seeks £3bn emergency funding plus £3.25bn equity investment
- Government contacts potential special administrators for SAR
- Temporary nationalization possible to maintain vital services
As Britain’s largest water utility navigates these choppy financial waters, the coming weeks will be critical in determining whether Thames Water sinks or swims. The government stands ready to throw a life preserver in the form of temporary public ownership, but the hope is that the company can still chart a course to safety through private sector solutions. The future of this vital utility, and the millions who depend on it, hangs in the balance.
