Thames Water shareholders have committed to provide £750 million in new equity funding over the next three years on condition that a “more focused” turnaround plan is developed.
The investors have also acknowledged that an extra £2.5 billion of fresh equity support will be needed for the second half of the decade.
It follows two weeks of speculation about the future of the UK’s largest water company, including the possibility of the special administration regime being used.
Announcing what it claims is the largest equity support package ever seen in the UK water sector, Thames promised “material and sustainable improvements in key performance metrics over the next three years”.
The update on funding came alongside the company’s 2022/23 financial results, which show revenue grew by 4% to £2.3 billion but EBITDA drop 3% to £1.1 billion. The company pointed out that its gearing level of 77.4% was at its lowest for 10 years, having fallen 3.2 percentage points in the past year.
Announcing the funding update, interim chief executives Cathryn Ross and Alastair Cochran, who stepped in after Sarah Bentley’s resignation on 27 June, said: “This announcement is a major milestone for Thames and all our stakeholders. Since June 2022, we have engaged constructively with shareholders, working towards a common goal of developing a long term, comprehensive, financeable and enduring business plan for the company to improve operational performance and financial resilience for the benefit of our customers and the environment.
“The substantial equity support package announced today will underpin the delivery of a more focused turnaround plan that builds on the foundations that have been put in place over the last two years and focuses expenditure on a smaller number of initiatives, which will deliver material and sustainable improvements in key performance metrics over the next three years.”
Ian Marchant, who departs as Thames chairman today to be replaced by Sir Adrian Montague, said: “Our shareholders have consistently been very supportive of Thames Water by approving investment in the business over and above regulatory allowances, foregoing any income since 2017 and investing £500 million of new equity funding in March 2023. The additional investment announced today is the largest equity support package ever seen in the UK water sector and underscores our shareholders’ commitment to delivering Thames’ turnaround and life’s essential service for the benefit of our customers, communities, and the environment.”