The government’s decision is preliminary but could impact Britain’s water regulator Ofwat, which will have the final say on whether to accept the proposal
International News via Reuters:
The British government rejected a £10 billion rescue proposal from creditors for Thames Water on Tuesday and said it was ready for “any outcome”, making nationalisation of the UK’s biggest water supplier more likely.
The government’s decision is preliminary but could impact Britain’s water regulator Ofwat, which will have the final say on whether to accept the proposal. Its decision is expected in coming months before Thames Water runs out of money later in the year.
The proposal is the only offer on the table for the utility which has been fending off financial collapse since 2023, struggling with a £20 billion pound debt pile, heavy fines for sewage pollution and its Victorian-era pipes and pumps.
Environment minister Emma Reynolds said that she was “not convinced the current proposal was good enough for consumers or the environment”, after years of sewage pollution and rising bills resulted in a public backlash.
“We standby for any outcome,” Reynolds said.
The government’s previous position was to say its preference was for a market-led solution to prevent Thames Water from ending up in its special administration regime (SAR), a form of temporary public ownership.
MONEY RUNNING OUT FOR THAMES
SAR, which would keep the taps running for the company’s 16 million customers, could create problems for the government. Thames Water’s debt could be added to the already-strained public sector balance sheet and international investors may turn away from the country if there are big debt write-downs.
The rescue package, proposed by a group of senior creditors including Invesco, Elliott Management and Silver Point Capital, is currently being reviewed by Ofwat.
SYMBOL OF FAILURE
Within Britain’s privatised water sector, Thames Water has become a symbol of failure, blamed for polluting rivers after previous owners loaded the company with debt and paid themselves dividends.
Having called the water industry broken, the government is in the process of overhauling it, a move that will create a new regulator to replace Ofwat.
But in the meantime, Ofwat is considering the rescue plan.
It must tread a line between holding Thames Water to account by fining it for pollution – the company last year received a record £123 million fine – while heeding warnings that the company will not attract the new investment it needs to improve without leniency on penalties.
Last year, U.S. private equity firm KKR walked away from a plan to buy Thames Water.
Under the creditor plan on the table, £3.35 billion of new cash would be pumped into Thames Water, alongside a new £6.55 billion debt facility, while £9.4 billion of debt would be written off.
Ofwat did not immediately respond to a request for comment. Thames Water said a market-led solution would best deliver its turnaround.
($1 = 0.7453 pounds)
Reporting by Sarah Young in London, Carlos Méndez in Mexico City and Preetika Parashuraman in Bengaluru; Editing by Joyjeet Das, Kate Holton and Susan Fenton
