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| Thames Water creditors ask for up to 15 years’ leniency from river pollution rules | Thames Water creditors ask for up to 15 years’ leniency from river pollution rules |
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| Lenders say a ‘full return to legal, regulatory and environmental compliance’ under new rescue plan would not be completed until at least 2035-2040 | Lenders say a ‘full return to legal, regulatory and environmental compliance’ under new rescue plan would not be completed until at least 2035-2040 |
| Business live – latest news | Business live – latest news |
| Thames Water may not fully comply with rules on pollution of England’s waterways for as long as 15 years, according to a new plan by creditors who are scrambling to avoid the utility being forced into government administration. | Thames Water may not fully comply with rules on pollution of England’s waterways for as long as 15 years, according to a new plan by creditors who are scrambling to avoid the utility being forced into government administration. |
| The creditors who in effect own Thames Water have said they will commit to paying fines for pollution, as well as writing off more of their loans and investing more in the company, in new proposals published on Thursday. | The creditors who in effect own Thames Water have said they will commit to paying fines for pollution, as well as writing off more of their loans and investing more in the company, in new proposals published on Thursday. |
| However, the creditors also said that “a full return to legal, regulatory and environmental compliance” under their plan would not be completed until at least the 2035-2040 period, raising the prospect of sewage levels above legal limits in some places for at least a decade. They will argue for further leniency on fines from the regulator, Ofwat, during that period, and that it will be impossible for the company to make upgrades across London and south-east England more quickly because of the scale of the work needed after years of neglect. | However, the creditors also said that “a full return to legal, regulatory and environmental compliance” under their plan would not be completed until at least the 2035-2040 period, raising the prospect of sewage levels above legal limits in some places for at least a decade. They will argue for further leniency on fines from the regulator, Ofwat, during that period, and that it will be impossible for the company to make upgrades across London and south-east England more quickly because of the scale of the work needed after years of neglect. |
| The group of financial institutions, under the new London & Valley Water holding company, has been locked in talks with Ofwat since May over acceptable terms for the hugely complex restructuring of Britain’s biggest water company. | The group of financial institutions, under the new London & Valley Water holding company, has been locked in talks with Ofwat since May over acceptable terms for the hugely complex restructuring of Britain’s biggest water company. |
| Thames Water has been crippled by huge debts built up over two decades by owners who have been criticised for paying out dividends without investing enough in its leaking pipes and malfunctioning treatment works. That contributed to widespread public outrage over the level of sewage in Britain’s rivers and seas. | Thames Water has been crippled by huge debts built up over two decades by owners who have been criticised for paying out dividends without investing enough in its leaking pipes and malfunctioning treatment works. That contributed to widespread public outrage over the level of sewage in Britain’s rivers and seas. |
| The new plan, which is not yet legally binding, is aimed at finding a way forward that is acceptable to Ofwat and to the Labour government, including the newly installed environment secretary, Emma Reynolds. | The new plan, which is not yet legally binding, is aimed at finding a way forward that is acceptable to Ofwat and to the Labour government, including the newly installed environment secretary, Emma Reynolds. |
| Mike McTighe, the proposed future chair of Thames Water under the terms of the plan, said: “There is a huge amount of work to be done to turn around Thames Water and deliver the improved service and environmental outcomes that customers and local communities deserve. | Mike McTighe, the proposed future chair of Thames Water under the terms of the plan, said: “There is a huge amount of work to be done to turn around Thames Water and deliver the improved service and environmental outcomes that customers and local communities deserve. |
| “From day one, we will inject billions in new investment, strengthen Thames Water’s balance sheet, transform the company for thousands of hard-working frontline staff and begin the delivery of an operational turnaround that puts 16 million customers and the environment first. | “From day one, we will inject billions in new investment, strengthen Thames Water’s balance sheet, transform the company for thousands of hard-working frontline staff and begin the delivery of an operational turnaround that puts 16 million customers and the environment first. |
| “Together with committed and experienced new investors, the collective focus of the new board under London & Valley Water’s plan will be on fixing the foundations, reducing pollution and rebuilding public trust so that by the end of this decade Thames Water can once again be a reliable, resilient, and responsible company.” | “Together with committed and experienced new investors, the collective focus of the new board under London & Valley Water’s plan will be on fixing the foundations, reducing pollution and rebuilding public trust so that by the end of this decade Thames Water can once again be a reliable, resilient, and responsible company.” |
| The alternative to a creditor-led turnaround plan is a special administration regime (SAR), under which the water company would come under temporary government control to impose debt write-offs and find a buyer. The government has been keen to avoid SAR, claiming that it would cost too much – although any costs would be recouped in the eventual sale – and fearing calls for permanent nationalisation from MPs. | The alternative to a creditor-led turnaround plan is a special administration regime (SAR), under which the water company would come under temporary government control to impose debt write-offs and find a buyer. The government has been keen to avoid SAR, claiming that it would cost too much – although any costs would be recouped in the eventual sale – and fearing calls for permanent nationalisation from MPs. |
| The creditors are also desperate to avoid SAR, as it would probably result in steeper debt write-offs. London & Valley Water said on Thursday that the investors would write off about £4bn of their loans, compared with about £3.2bn offered in May. Senior sources at Ofwat had previously expressed concerns that the previous level of debt write-off proposed by the creditors, at 20%, was not sufficient. The new proposal equates to a 25%, although Ofwat sources had suggested that a 30% write-off would be more realistic. Junior creditors will have their entire £1bn debt written off, as before. | The creditors are also desperate to avoid SAR, as it would probably result in steeper debt write-offs. London & Valley Water said on Thursday that the investors would write off about £4bn of their loans, compared with about £3.2bn offered in May. Senior sources at Ofwat had previously expressed concerns that the previous level of debt write-off proposed by the creditors, at 20%, was not sufficient. The new proposal equates to a 25%, although Ofwat sources had suggested that a 30% write-off would be more realistic. Junior creditors will have their entire £1bn debt written off, as before. |
| The creditors also said they would invest about £150m more in new equity capital than previously suggested, taking the total to £3.15bn. | |
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| They have also dropped an insistence that Thames Water should be spared payment of outstanding fines – a politically unpalatable demand that was explicitly opposed by the former environment secretary Steve Reed. | They have also dropped an insistence that Thames Water should be spared payment of outstanding fines – a politically unpalatable demand that was explicitly opposed by the former environment secretary Steve Reed. |
| The creditors would also commit to paying no dividends while under formal Ofwat oversight, and not selling the business before 31 March 2030. | The creditors would also commit to paying no dividends while under formal Ofwat oversight, and not selling the business before 31 March 2030. |
| However, they also flagged the possibility of an extra £4bn in future costs to cover new standards on urban sewage treatment, another £4bn they argued should have been granted to Thames Water in Ofwat’s latest round of bill increases, plus £1.5bn for further environmental permit costs. They said all those costs would have to be funded by customer bills after 2030. | However, they also flagged the possibility of an extra £4bn in future costs to cover new standards on urban sewage treatment, another £4bn they argued should have been granted to Thames Water in Ofwat’s latest round of bill increases, plus £1.5bn for further environmental permit costs. They said all those costs would have to be funded by customer bills after 2030. |
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