Shareholders in Thames Water have branded the company’s business plan “uninvestible” and withdrawn a promised £500 million cash injection due for the end of this month.
It comes after feedback from Ofwat on the company’s plan for 2025-2030.
Thames said it would now “pursue all options to secure the required equity investment from new or existing shareholders”. However, the announcement has already triggered speculation that the company will need to be rescued by the special administration regime – an effective nationalisation.
The £500 million due on 31 March was the first instalment of a £750 million commitment from shareholders made last summer, which was dependent on approval of the business plan underpinning a “more focussed turnaround”.
The company said based on feedback from Ofwat to date “the regulatory arrangements that would be expected to apply to Thames Water in AMP8 make the PR24 plan uninvestible” and as a result the conditions for shareholder backing had not been met.
A separate announcement by the shareholders, which include Universities Superannuation Scheme (USS) and the Ontario Municipal Employees Retirement System (OMERS), confirmed they could not commit to further interest payments and unless an extension is granted by lenders, the company will not be able to repay the £190 million due on 30 April 2024
Thames said discussions with Ofwat and other stakeholders were ongoing and stressed that as of 29 February it has liquidity of £2.4 billion.
Chief executive Chris Weston said: “I’d like to reassure our customers that, despite this announcement, it is business as usual for Thames Water. Our 8,000 staff remain committed to working with our partners in the supply chain to provide our services for the benefit of our customers, communities and the environment.”
An Ofwat spokesperson said: “Safeguards are in place to ensure that services to customers are protected regardless of issues faced by shareholders of Thames Water.”
They added: “Ofwat’s PR24 price control will put customer and environmental priorities at the heart of the water sector. In order to drive this change, we need to ensure that the sector attracts investment and is fair to bill payers. Since 2020 nearly £4.6 billion new equity has been injected into the sector. We will set out our draft determinations in June this year.
“We also need to see companies deliver the performance that customers expect and that they are run in a way that meets customers’ expectations.”
Thames’ draft business plan, submitted in October, set out the case for £18.7 billion of spending over AMP8, with customer bills set to rise 40% as a result. At the time the company called it an “ambitious but credible plan”.
Consumer group CCW warned that billpayers should not foot the bill for previous underinvestment. Its chief executive Mike Keil said just 16% of billpayers think the proposed plan will be affordable.
He said: “Customers understand that investment is needed but they should not have to pay for Thames Water’s past failures – they’ve already paid a high price through the company’s poor complaints record and service levels.”