Thames Water in crisis as investors pull £500m bailout

28th Mar 2024 07:34

(Sharecast News) - Struggling UK utility Thames Water faced a funding crisis on Thursday as shareholders pulled a £500m bailout after regulators refused its demands to hit customers with massive price hikes, greater leniency for polluting waterways and pay out higher dividends, while its parent company also admitted it couldn't pay back a £190m loan.

The largely foreign group of investors were due to hand over the first tranche of a £750m cash injection at the end of March, but said they now regarded the company as "uninvestible" and tried to shift blame onto regulator Ofwat for rejecting Thames Water's latest business plan to fix its leak-ridden network of pipes.

Thames Water's parent company, Kemble Water Finance, also said it can't repay a debt that due at the end of April and had appointed advisers from turnaround consultant Alvarez & Marsal to handle negotiations with lenders and the holders of its debt in an attempt to buy more time.

Unless funding is secured the company could face the prospect of being placed under special administration by the government, although chief executive Chris Weston on Thursday insisted this was not an immediate concern as Thames had enough cash to run day-to-day until May 2025.

"If at the end of the day - probably well into the end of next year - we were in a situation where we had no equity, then there would be the prospect ... of special administration, but we are a long way from that point at the moment," he told the BBC.

Investors had originally wanted the company to raise bills by 40% over the next five years. Customers this month were hit with eye-watering rises of around 13% for 2024 amid a cost-of-living crisis.

Thames is labouring under a massive £14bn debt pile built up over years while investors received huge dividends. It has faced sever criticism for failing to tackle leaks and allowing sewage to be pumped into rivers and streams.

It ultimately wants a £2.5bn shareholder bailout to the end of the decade to stay solvent, but also held out the begging bowl to Ofwat, demanding it be allowed to raise prices, pay higher dividends and be let off the hook for polluting rivers and streams by receiving lower fines.

The GMB union, which represents workers at Thames Water accused the investor group of "essentially blackmailing customers and Ofwat".

"Assets and infrastructure are falling apart - instead of putting the money in to fix it, shareholders are refusing to pay a penny unless bills are allowed to rocket," said national officer Gary Carter. "Holding bill payers to ransom for costs after years of underinvestment is completely unacceptable."

Parent company Kemble Water has also received a £500m loan from shareholders. Thames Water is the UK's biggest water supplier with 15 million customers across London and the South East.

It is owned by the Canadian pension fund Omers, Britain's Universities Superannuation Scheme, Infinity Investments - which is owned by Abu Dhabi's sovereign wealth fund - British Columbia Investment Management Corporation, UK-based investor Hermes GPE, sovereign wealth fund China Investment Corporation, the Queensland Investment Corporation, Aquila GP and Dutch pension fund Stichting Pensioenfonds Zorg en Welzijn.

Reporting by Frank Prenesti for Sharecast.com