The Department for the Environment, Food and Rural Affairs (Defra) has stated that the supersewer is a specified infrastructure project (SIP), and as such prohibits Thames Water to conduct the main tunnel construction work.
The project will be financed and delivered by an independent IP, with its own licence from regulator Ofwat, which will “largely ring-fence Thames Water from the risks associated with the construction”, according to Moody’s.
The signing of the SIP notice “has no ratings implication” for Thames Water, according to the ratings agency.
Stefanie Voelz, Vice President, Senior Analyst, at Moody’s, said: “We remain of the view that Thames Water’s involvement in this project will create incremental risk for the company’s credit quality that is unique to Thames Water.
“Given the expected reduction in allowed returns and, consequently, cash flows for the next regulatory period, Thames Water may have limited flexibility to absorb the incremental risk associated with its involvement in the TTT project.
“This incremental risk exposure is reflected in the current negative outlook on the companies’ ratings.”