Thames Water races to secure new backing in bid to save company as customers fear price hikes
- Thames Water is battling to survive amid its estimated £14billion of debt
- The company’s boss Sarah Bentley has dramatically quit her £1.6m-a-year job
Thames Water is racing to secure new backing in a bid to save the company as customers fear price hikes.
Britain’s biggest water company, which serves 15 million customers, has been holding talks on fresh funding to secure its long-term future as it battles to survive amid its crippling £14 billion debt.
It has now emerged that investors including Canadian pension fund Omers and the Universities Superannuation Scheme (USS) have committed to providing new equity for Thames Water.
Insiders have told Sky News that more details about the major capital injection are expected to be announced to the stock market on Monday morning.
While it is not clear what the size of the initial equity-raise will be, one source told the outlet that it was unlikely to be more than the £1bn which Thames Water said it was working with shareholders to find last year.
It comes after it was revealed late last month that the Government was drawing up contingency plans for the potential collapse of Thames Water after its boss Sarah Bentley dramatically quit.
Thames Water is racing to secure new backing in a bid to save the company as customers fear price hikes
It was revealed late last month that the Government was drawing up contingency plans for the potential collapse of Thames Water after its boss Sarah Bentley (pictured) dramatically quit
The backing is non-binding which means shareholders could yet pull out – but it’s believed to have been seen as a condition of PricewaterhouseCoopers, Thames Water’s auditor, signing off the water company’s accounts on a going concern basis.
READ MORE: Thames Water boss Sarah Bentley quits £1.6m a year job after bust up and giving up her bonus amid fury over sewage leaks
A previous letter cited in the company last September said shareholders had ‘further evidenced their support for [Thames Water] and its business plan through an Equity Support Letter’.
It added that ‘shareholders have committed to hold investment committee meetings (for their respective institutions) as a path to obtaining approval (in the discretion of the investment committee) for funding their pro rata share of conditional commitments in respect of the further £1bn of additional equity which is assumed in TWUL’s business plan.
‘Whilst this is not a legal commitment to fund…the board believes it is reasonable to incorporate this additional £1bn of equity funding in its assessment.’
It’s not yet clear whether the latest backing was materially different to the support given 10 months ago.
Earlier this week, the chief of the industry regulator Ofwat warned that water companies are planning further price rises for households.
Chief executive David Black also said that Thames Water customers will not have to cover the cost if the debt-ridden water company collapses.
He said suppliers want bills to rise to fund infrastructure investment despite the sector coming under increased scrutiny over financial uncertainty, dividend payouts and environmental failures.
Thames last year suffered its worst leakage rate in five years, with an estimated 630million litres of water a day escaping. Pictured is a flooded road in London on August 8
In 2022, Thames Water’s leak rate was the worst for five years. Pictured is a Thames Water official delivering bottled water to residents in Northend after its supply was cut off
Ms Bentley’s shock departure came exactly a week after Thames Water reportedly discharged sewage into Henley-on-Thames in Oxfordshire. Pictured is a dead fish in the river after the release
Mr Black defended the watchdog’s performance in an interview on BBC Radio 4’s Today programme on Wednesday.
Asked whether customers will have to pay if Thames fails to secure new funding, he said: ‘No. The provisions are there to impose what’s called a special administration, and so this is a form of an insolvency process but it’s designed to protect the interest of customers, and services will be maintained.
‘That’s the backstop option of a special administrator being appointed but we are still a long way from that position.’
He said the company has £4.2 billion in cash and credit but is looking to secure further financing by early next year.
On Tuesday, the utility giant was fined £3.3 million over a ‘reckless’ incident in which ‘millions of litres’ of undiluted sewage was pumped into rivers near Gatwick Airport in 2017.
Insiders have told Sky News that more details about the potential capital injection are expected to be announced to the stock market on Monday morning
Thames last year suffered its worst leakage rate in five years, with an estimated 630million litres of water a day escaping from its ageing network of pipes.
READ MORE: Water firms are planning new price rises for customers, Ofwat chief warns as he says Thames Water customers won’t have to cover cost if firm collapses
Thames Water has often come under fire for its record on sewage and leaks. At the same time, executives have continued to be paid large bonuses and hundreds of millions of pounds have been dished out in dividends to shareholders.
Ms Bentley’s dramatically resignation was a move observers said had worsened the ‘perilous situation’.
Ms Bentley, who has run the company for three years, resigned with immediate effect and will be replaced on an interim basis by finance boss Alastair Cochran and Cathryn Ross, director of strategy and external affairs.
Bentley received £1.5m for her work in 2022-23, whilst Severn Trent boss Liv Garfield and Steven Mogford, former chief executive of United Utilities, both earned £3.2m for 2022.
Thames is now on the hunt for a permanent replacement.
While the firm did not give a reason for the abrupt resignation, sources told the Mail a row over company strategy may have precipitated her departure.
It comes as The Times reports that water companies could increase bills by as much as 40 per cent, adding to the burden on households who have already witnessed surges in their energy and food costs.
Extinction Rebellion protesters target Thames Water Little Marlow Sewage Treatment Works in Buckinghamshire in April
Mr Black admitted that suppliers are seeking further rises.
‘We expect companies will request increases in bills at the next price review to fund larger investment programmes and those programmes will deliver improvements to the environment,’ he said.
Thames Water, which serves almost a quarter of the UK’s population, is owned by a consortium of pension funds and sovereign wealth funds.
Its largest shareholder is Ontario Municipal Employees Retirement System which holds almost 32 per cent, while other shareholders include China Investment Corporation – the country’s sovereign wealth fund – and the Universities Superannuation Scheme which is Britain’s biggest private pension fund.
Abu Dhabi’s Infinity Investments and Hermes, which manages BT’s pension scheme, are also shareholders.
MailOnline has contacted Thames Water for comment.
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