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| Thames Water has significant issues to address, Ofwat says | Thames Water has significant issues to address, Ofwat says |
| (about 1 hour later) | |
| Thames Water has "significant issues to address" and needs to improve its "financial resilience", the water regulator Ofwat has said. | Thames Water has "significant issues to address" and needs to improve its "financial resilience", the water regulator Ofwat has said. |
| The UK's largest water company, which serves a quarter of the UK population, is in talks to secure extra funding as it struggles to pay its debts. | The UK's largest water company, which serves a quarter of the UK population, is in talks to secure extra funding as it struggles to pay its debts. |
| On Wednesday, the government said it was ready to act in a worst case scenario if the company collapsed. | On Wednesday, the government said it was ready to act in a worst case scenario if the company collapsed. |
| Regardless of what happens, water supplies will continue as normal. | Regardless of what happens, water supplies will continue as normal. |
| The government has said that "a lot of work is going on behind the scenes" with Thames Water and it had a process in place "if necessary". | The government has said that "a lot of work is going on behind the scenes" with Thames Water and it had a process in place "if necessary". |
| The company is understood to be struggling to raise the money it needs to service its substantial debt pile, which is around £14bn. Interest payments on more than half of its debt are linked to the rate of inflation, which has soared over the last year. | |
| In a statement, Ofwat said it had been clear "that Thames Water has significant issues to address - their environmental record and leakage performance, for example, are poor". | In a statement, Ofwat said it had been clear "that Thames Water has significant issues to address - their environmental record and leakage performance, for example, are poor". |
| "Alongside the turnaround of their operational performance, they need to improve their financial resilience too." | "Alongside the turnaround of their operational performance, they need to improve their financial resilience too." |
| However, Ofwat also noted that the company still has access to funds. "It recently received an additional £500m from shareholders and has £4.4bn of cash and committed funding." | However, Ofwat also noted that the company still has access to funds. "It recently received an additional £500m from shareholders and has £4.4bn of cash and committed funding." |
| It added that it would continue to keep water companies' financial resilience "under close scrutiny and work with companies to ensure they take action to ensure that they have the financial backing to deliver for customers and the environment". | It added that it would continue to keep water companies' financial resilience "under close scrutiny and work with companies to ensure they take action to ensure that they have the financial backing to deliver for customers and the environment". |
| Thames Water in urgent talks amid collapse fears | Thames Water in urgent talks amid collapse fears |
| Lib Dems unveil plan to overhaul water industry | Lib Dems unveil plan to overhaul water industry |
| Other water firms are facing similar pressures due to higher interest payments on their debts and rising costs including higher energy and chemical prices. Ofwat said last year that it was concerned about the financial resilience of Yorkshire Water, SES, Southern and Portsmouth Water as well as Thames Water. | |
| Thames Water has come in for strong criticism over its performance following a series of sewage discharges and leaks. The firm leaks more water than any other water company in UK, losing the equivalent of up to 250 Olympic size swimming pools every day from its pipes. | Thames Water has come in for strong criticism over its performance following a series of sewage discharges and leaks. The firm leaks more water than any other water company in UK, losing the equivalent of up to 250 Olympic size swimming pools every day from its pipes. |
| The company has said it is trying to raise the cash it needs to service its debts and is keeping Ofwat informed on progress. It added it still had "strong" cash and borrowing reserves to draw on. | |
| However, if the firm cannot secure additional funding, it could be temporarily taken over by the government until a new buyer is found, in a special administration regime (SAR). This route was most recently taken with energy supplier Bulb after it ran into financial difficulties. | |
| On Tuesday, Thames Water's chief executive Sarah Bentley quit the business after just two years in the job. It came weeks after she was asked to forgo her bonus over the company's handling of sewage spills. | On Tuesday, Thames Water's chief executive Sarah Bentley quit the business after just two years in the job. It came weeks after she was asked to forgo her bonus over the company's handling of sewage spills. |
| The firm did not give a reason for her departure. Earlier this year, Ms Bentley had blamed the firm's poor record on sewage management on failings at the company before she joined. | |
| Speaking to BBC Breakfast, Labour MP Darren Jones, the chair of the Business and Trade Committee, said that if the government was forced to take over the running of Thames Water, "taxpayers will be exposed to the debt and running costs of a very large company". | Speaking to BBC Breakfast, Labour MP Darren Jones, the chair of the Business and Trade Committee, said that if the government was forced to take over the running of Thames Water, "taxpayers will be exposed to the debt and running costs of a very large company". |
| He said that the problems seen at energy companies in recent years showed that: "We have to take on the cost of running these failed businesses, which is why it's so galling for taxpayers when they see that regulators and ministers have failed to spot this problem before it all blew up." | |
| Since the water companies were privatised there has been steady criticism of the amount of money paid to investors, through dividends, and to executives given their record on leaks and sewage discharges | |
| Between 1991 and 2021 water companies have paid out £50.6bn in dividends. | |
| Speaking to the Today programme, Philip Dunne, Conservative MP and chair of the Environmental Audit Committee, said there was "no question there have been excessive payments to executives". | |
| "Remember water companies don't have to worry about their top line, their top line is provided day in, day out without having to do the work that normal companies have to do, which is management to focus on generating revenue. Revenue here arises as, of course, everybody turns on their taps and starts consuming water." | |
| Professor David Hall of the University of Greenwich said investors were reluctant to take on the risk of further investment due to fears it would not be repaid. | |
| He said the £500m of investment in Thames Water was the only time investors had put their own cash into the company since it was privatised in 1989, having instead raised cash for investment from customer bills. | |
| Related Topics | Related Topics |
| Companies | Companies |
| Thames Water | Thames Water |