Thames Water shareholders have agreed a plan to invest a further £1.5 billion over the next three years.
Investors will pledge an additional £500 million in this financial year with talks ongoing to provide a further £1 billion of equity funding over the course of the current regulatory period, to March 2025. This will be subject to certain performance milestones.
Combined with the £500 million already put into the company by investors, this represents an increase in expenditure for AMP7 to £11.5 billion, from the £9.6 billion agreed in Thames’ final determination in 2019.
Chairman Ian Marchant described the plan as “one of the largest commitments of new equity in the UK water sector”.
The company said the funding would go towards improving performance and outcomes for customers, leakage and river health and to “establish a solid foundation for Thames Water’s long term growth”.
Thames said the focus of its revised business plan would be to “maximise the likelihood that Thames Water receives a regulatory determination that supports the turnaround”. The company acknowledged that further shareholder support may be required to improve financial resilience.
Chief executive Sarah Bentley said: “Since joining in September 2020 I have engaged in understanding the challenges that led to Thames Water’s long-term underperformance. In March last year, I launched our turnaround plan, to tackle the issues directly, transform performance and build a better Thames Water for all of our stakeholders. I brought on board an almost entirely new executive team and moved the business closer to customers by establishing separate operational teams in London and the Thames Valley. One year into the turnaround, we have made good progress in fixing the basics and tackling the structural challenges in our business as well as laying the foundations for our long-term recovery.
“However, everyone at Thames is aware that we’re only at the start of our journey and there remains a huge amount to be done and delivered. We’re also aware that none of the programme can be delivered without significant capital investment. With this new, substantial equity investment programme our shareholders are both underpinning the investment vital for our improvement and also expressing their confidence in the long-term outlook for Thames Water. We warmly welcome their continued support.”
Outgoing Ofwat chairman Jonson Cox welcomed the extra equity by investors as a “signal of Thames Water’s intent to get their house in order”.
He said discussion between the regulator and the company over the past year about the need to strengthen the company’s financial resilience had been “constructive”.
However, he added: “Thames Water still has many issues to address to meet the service and resilience levels we expect, but seeing its shareholders putting in additional investment will help the management team to make the progress needed to deliver on its transformation plan.”