UK government on standby to bail out Thames Water, the nation’s biggest water supplier

LONDON - The British government is monitoring Thames Water and prepared for a range of scenarios that could include taking it into temporary state ownership as the country’s biggest water supplier grapples with huge debts.

Thames Water, which supplies about 27 per cent of Britain’s population, said it was “continuing to work constructively with its shareholders” in relation to its funding needs in a statement responding to press speculation.

Sky News reported earlier that, under contingency plans being drawn up by ministers, Thames Water could be placed into a “special administration regime”, effectively state ownership, should it collapse under its 14 billion pound (S$24 billion) debt pile.

Water companies in England and Wales have become a huge political headache for Prime Minister Rishi Sunak’s Conservative government.

There has been a public outcry over the release of sewage into rivers and seas, and rising bills, which have raised questions over the Conservatives’ privatisation of the sector in 1989.

When asked about Thames Water’s finances on Wednesday, a government spokesman said they were a matter for its shareholders, which include a Canadian pension fund and other financial investors.

“We prepare for a range of scenarios across our regulated industries - including water,” the spokesman said.

“Ofwat (the regulator) continues to monitor the financial position of all the key water and wastewater companies.”

Britain was forced to call on its special administration regime in 2021 in the energy supply sector, which like water is also a privatised regulated industry, when it rescued energy supplier Bulb after it collapsed.

As well as considering Thames Water’s finances, the government is more generally concerned with Britain’s water bills, which could rise by an average 25 per cent between 2025-2030 according to a Times newspaper study.

Finance minister Jeremy Hunt is meeting Ofwat, along with other industry regulators, to discuss the issue on Wednesday.

Dirty beaches

Clean water campaign groups accuse the water companies of failing to invest in infrastructure.

Public anger has been further stoked by the payment of dividends to investors and large salaries and bonuses to water industry executives.

Thames Water, which counts Ontario Municipal Employees Retirement System, the UK’s Universities Superannuation Scheme and China Investment Corp as shareholders, has said it is seeking an extra 1 billion pounds from its shareholders.

In a sign of the pressure the company is under, Chief Executive Sarah Bentley stepped down with immediate effect on Tuesday after two years trying to turn around the business.

She was replaced by two co-chief executives, Chief Finance Officer Alastair Cochran and former Ofwat boss Cathryn Ross, who has been at Thames Water since 2021.

About 1.4 billion pounds of Thames Water’s debt is due to be repaid by the end of 2024 and restructuring specialists Alix Partners are advising the business, the Daily Telegraph said.

Thames Water said in its statement that its investors had provided 500 million pounds in March and it was working with them to try to secure the further equity funding needed to support its turnaround and investment. Ofwat was being kept informed of progress, it added.

Analysts from US-based investment banking company, Jefferies, said Britain’s listed water operators Severn Trent, Pennon Group and United Utilities were better capitalised than Thames Water, but the issues with the largest company meant a “heightened regulatory environment”.

Daily headlines about rivers and beaches polluted by sewage released by water companies look set to turn water into a major issue at the next general election, expected next year.

Such releases of sewage are only supposed to happen during exceptional rainfall to stop it backing up into homes.

But campaigners say water companies are discharging sewage much more often than they should.

In 2022, water companies in England alone released raw sewage into rivers and the sea 301,091 times, an average of 825 times a day, according to data from the Environment Agency.

Thames Water said in its annual report in October that it had not paid a dividend to its shareholders for the last five years.

Previous owners Australia’s Macquarie, however, was paid a dividend of 1.6 billion pounds over the decade to 2016, according to the Financial Times.

Ofwat could not immediately be reached for comment. REUTERS