Thames Water has asked its creditors for another £۲.۴bn as the embattled water company comes close to running out of cash.
The UK’s largest water company said on Thursday it needed another short-term cash injection because it would be unable to reach a longer-term deal to sort out its giant debt pile before running out of cash by “the end of ۲۰۲۶ or the start of ۲۰۲۷”.
Thames Water said in a statement to the stock market that it “does not expect to complete its recapitalisation process ahead of this date”, meaning it would run out of cash without creditors stumping up more.
The utility company serves ۱۶ million customers in London and the Thames valley. However, it has been on the brink of collapse for several years after it became overwhelmed by a debt pile that is now about £۲۰bn. Its shareholders walked away, leaving the company under the effective control of its creditors while they work out a deal to avoid bankruptcy.
The creditors gave Thames a £۳bn lifeline in February last year to try to see it through negotiations on a deal to cut its debts and inject more money. The creditors, collectively called the London & Valley Water company, are led by a group of American hedge funds such as Elliott Management and Silver Point Capital, and institutional investors including BlackRock and M&G.
However, those talks have dragged on, and the water company has now drawn down £۲.۶۵bn of the £۳bn, leaving it perilously close to running out of cash even as it carries out a series of expensive repairs and upgrades.
Thames said the extra cash would “extend […] liquidity into autumn ۲۰۲۷ and allow [it] to continue to deliver its capital programme and deliver improvements for customers and the environment”.
Thames Water’s creditors have drawn up detailed proposals for a rescue plan that would involve them writing off £۹.۶bn in loans. However, that plan hinges on Ofwat agreeing to let the company pay set penalties for several years upfront, and effectively creating a special regime for the company. That prospect has proven politically unpalatable for the Labour government.
Some Labour politicians and environmental campaigners called on Keir Starmer and then Andy Burnham to put Thames Water into special administration, a form of temporary government control while a new buyer is sought.
Burnham has pledged more public control of the UK’s water industry, and has said that public ownership for Thames Water “is what should be done”.
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In addition, the change of prime minister has led to regulatory uncertainty for the broader water industry. Starmer’s government had committed to implementing recommendations on changes to the water system from the former Bank of England deputy governor Sir John Cunliffe, but Burnham’s government has not yet made clear what it plans to do.
Thames Water said it “continues to work closely with stakeholders to secure a market-led solution”.
Thames Water’s creditors are expected to vote on the proposals later in the month.
