Consultants ‘cautious’ about bidding for Thames work

Consultants are unlikely to be put off bidding for work with Thames Water, despite ongoing uncertainty about the firm’s finances.

Three senior consultancy managers told Utility Week that they would still bid for upcoming work with Thames. However, they said that they would be “cautious” about entering into contractual agreements without assurances about Thames’ future.

The future of Thames Water was thrown into doubt after the sudden departure of its chief executive Sarah Bentley last week.

It sparked reports that the company was on the brink of collapse, with the government and regulator drawing up contingency plans.

Despite the uncertainty, Thames is pushing on with procurement for its suite of frameworks. At the end of last week, the company began its search for consultants to join its £300 million technical partners framework.

The framework is designed to support the delivery of Thames’ Strategic Resource Options (SRO) Programmes, which includes the Southeast Strategic Reservoir Option and London Water Recycling projects. It also includes serval transfer schemes between Thames and other water companies including Severn, Affinity and Southern.

At this point Thames is asking for interested parties to register their interest by the end of the month.

A director at one British consultant told Utility Week that “it would be ridiculous” not to express interest at this early stage of procurement.

“Procurement takes a long time,” they said. “By the end of the month things could look a lot better for Thames, so not expressing an interest now could prove to be a missed opportunity in just a few weeks time.”

A bid manager at another consultant added: “I don’t think we’d be put off bidding, but we will be keeping a close eye on how things progress [at Thames].

“If the investors put in the extra funding then it shouldn’t impact this tender at all. If the company fails and is bought out by somebody else then it could mean procurement is paused and restarted later down the line.

“That could see the whole process restarted which could mean a lot of wasted time and resources, so we will be approaching things with caution.”

A third source added that Thames’ current position won’t stop them bidding for work “but it might make us prioritise other work that we’re more certain of”.

The framework covers engineering services, construction-related services, architectural and related services, urban planning and landscape architectural services, public utilities, consulting services for water-supply and waste consultancy, development consultancy services, business and management consultancy and related services, and consulting services for water-supply and waste-water other than for construction.

It is due to run for up to eight years and applies to projects across the UK.

As revealed by Utility Week last week, Thames’ second biggest shareholder, Universities Superannuation Scheme (USS), is poised to stump up extra investment to stop the firm from being put into the special administration regime.

However, sources close to the negotiations have suggested that foreign investors are still to be convinced.

Investors collectively put £500 million into the company in March, however they are being asked for an additional £1 billion.

It is understood that Thames Water’s largest shareholder, Ontario Municipal Employees Retirement System (OMERS), is among investors yet to be convinced to inject additional capital into the struggling firm.

The uncertainty around Thames has also spooked credit rating agency S&P, which has placed Thames onto CreditWatch. The company maintains its BBB and BB+ issue ratings on its class A and class B debt, but S&P warned it could slide amid uncertainty.

It said the company’s turnaround plan could be hindered by lack of clarity on management and timings of equity injections. Ratings could be downgraded one notch in the coming three to six months, S&P said.

In March Ofwat updated licence conditions to formalise that all water companies must maintain at least two investment grade issuer credit ratings. From 2025, the regulator will be able to block dividend payments if the company loses its strong credit rating. Companies are currently required to have a credit rating that demonstrates the business is financially resilient. The code modification would increase the threshold at which dividends could be restricted.