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| Thames Water in race to find cash as problems get worse | |
| (32 minutes later) | |
| Thames Water's shareholders are refusing to give the struggling water giant extra cash unless bills rise. | Thames Water's shareholders are refusing to give the struggling water giant extra cash unless bills rise. |
| They were due to invest almost £4bn into the business over the next two years, but have withheld it saying its turnaround plan is "uninvestible". | They were due to invest almost £4bn into the business over the next two years, but have withheld it saying its turnaround plan is "uninvestible". |
| Shareholders want the regulator Ofwat to agree to a substantial increase in water bills for Thames' customers over the next five years. | Shareholders want the regulator Ofwat to agree to a substantial increase in water bills for Thames' customers over the next five years. |
| Fears emerged last year that Thames could collapse due to its huge debts. | Fears emerged last year that Thames could collapse due to its huge debts. |
| Thames Water said the funding plan drawn up last July was subject to various conditions being met including improvements for customers and the environment over the next three years. | Thames Water said the funding plan drawn up last July was subject to various conditions being met including improvements for customers and the environment over the next three years. |
| The owners' initial business plan asked for a 40% rise in bills over the next five years but it thought that the shareholders may want to see even higher bill rises as a condition of injecting more money. | The owners' initial business plan asked for a 40% rise in bills over the next five years but it thought that the shareholders may want to see even higher bill rises as a condition of injecting more money. |
| The first tranche of the £3.75bn investment was due at the end of March, but has now been withheld. | The first tranche of the £3.75bn investment was due at the end of March, but has now been withheld. |
| However, sources close to Ofwat have said they are going to "stick to their guns" and won't be forced into raising customer bills to address the shareholders debt problems. | However, sources close to Ofwat have said they are going to "stick to their guns" and won't be forced into raising customer bills to address the shareholders debt problems. |
| Chancellor Jeremy Hunt said the shareholder move "should not have an impact on the services received by customers" and that the company was still solvent. | Chancellor Jeremy Hunt said the shareholder move "should not have an impact on the services received by customers" and that the company was still solvent. |
| But he added that "there are parts of the country where the service has not been up to scratch, including in my own constituency". | But he added that "there are parts of the country where the service has not been up to scratch, including in my own constituency". |
| Thames Water is heavily indebted, with a large proportion of its debt pile having been run up when it was owned by Macquarie, an Australian infrastructure bank. | |
| Interest payments on more than half of Thames' debt rise with inflation, which, while it has been falling, is still above Bank of England targets. | |
| Macquarie said that it invested billions of pounds in upgrading Thames's water and sewage infrastructure while it owned the company. | |
| But critics argue that it took billions of pounds out of the company in loans and dividends - which is a share of a business's profits that is paid to shareholders. | |
| Along with many UK water firms, Thames Water has been in the spotlight for pumping sewage into rivers. | |
| Between 2020 and the end of last year, it discharged at least 72 billion litres of sewage into the Thames. | |
| Thames Water has said it was planning to "upgrade over 250 of our sewage treatment works and sewers", and has built the Tideway Tunnel super sewer to divert 34 of the most polluting sewage outflows that have been discharging into the Thames. | |
| The government has previously said it is ready to take over Thames Water, which it the UK's largest water company, in the event that it collapses. It serves 15 million households, mostly across London and parts of southern England. | |
| The regulator insists that even without the additional capital, the Thames Water operating company will not need to be nationalised immediately as it is still generating enough money to keep it going day-to-day for up to 18 months. | The regulator insists that even without the additional capital, the Thames Water operating company will not need to be nationalised immediately as it is still generating enough money to keep it going day-to-day for up to 18 months. |
| Speaking to the BBC, Chris Weston, chief executive of Thames Water, said he wanted to "reassure our customers that the business continue to operate as usual". | Speaking to the BBC, Chris Weston, chief executive of Thames Water, said he wanted to "reassure our customers that the business continue to operate as usual". |
| He said the company was "a long way" from nationalisation "at the moment". | He said the company was "a long way" from nationalisation "at the moment". |
| Ofwat said safeguards were in place to ensure that services to customers were protected "regardless of issues faced by shareholders of Thames Water", and said the sector had to be "fair to bill payers". | Ofwat said safeguards were in place to ensure that services to customers were protected "regardless of issues faced by shareholders of Thames Water", and said the sector had to be "fair to bill payers". |
| "The company must now pursue all options to seek further equity for the business to turn around the performance of the company for customers. "We also need to see companies deliver the performance that customers expect and that they are run in a way that meets customers' expectations," it added. | "The company must now pursue all options to seek further equity for the business to turn around the performance of the company for customers. "We also need to see companies deliver the performance that customers expect and that they are run in a way that meets customers' expectations," it added. |
| However, at some point Thames will need to raise new money to finance the huge programme of investment that is needed and if the current shareholders - which include domestic and foreign pension funds as well as wealth funds from China and Abu Dhabi won't inject cash - Thames will need to find new ones. | However, at some point Thames will need to raise new money to finance the huge programme of investment that is needed and if the current shareholders - which include domestic and foreign pension funds as well as wealth funds from China and Abu Dhabi won't inject cash - Thames will need to find new ones. |
| Sources close to the current owners say that unless Thames can pay a return - few people will find it an attractive investment. | Sources close to the current owners say that unless Thames can pay a return - few people will find it an attractive investment. |
| Related Topics | Related Topics |
| Companies | Companies |
| Thames Water | Thames Water |