Thames Water said it intended to tap investors for fresh funds as it would run out of money by next June without a cash injection.
The debt-laden company, which has faced sustained criticism over sewage dumps, leaky pipes and executive pay, said it had £1.8bn, “sufficient to fund our operations for the next 11 months to the end of May 2025”.
In financial results for the year to 31 March, Thames said revenues rose 10% to £2.4bn as a result of “inflation linked” increases in the amount it charged for water and wastewater services. Profits jumped 21% driven by higher revenues and “cost discipline”.
Thames has £15.2bn of debt, up £1.3bn on the previous year, the bulk of which could be added to the public purse if the government stepped in to renationalise the troubled company. The Guardian revealed in April a contingency plan, codenamed Project Timber, was being drawn up in Whitehall to renationalise Britain’s biggest water company if it collapses.
Thames said it was “reasonable” to assume it would have sufficient resources to continue operating until at least April 2025, but there were “material uncertainties”. These included not securing commitments for future funding, a downgrade to its credit rating or a failure to meet its legal obligations.
The situation is so severe that the new prime minister, Keir Starmer, and chancellor, Rachel Reeves, have been briefed by Whitehall officials that the poor state of Thames presents a “critical risk” to the country during their first few days in office.
Chris Weston, the chief executive of Thames who joined in January, said the company could still find a solution in the financial markets, depending on decisions by its regulator, Ofwat.
“I continue to believe that a market-led solution that increases financial resilience is in the best interests of all stakeholders, but it is dependent on securing a final regulatory determination that is deliverable, financeable and investable, as well as affordable for our customers,” he added.
On Thursday, Ofwat will give its first view on five-year business plans submitted by English and Welsh water companies, including Thames, last year.
Thames said it intended to contact potential investors after Ofwat’s documents had been published.
The Ofwat review will indicate by how much Thames will be allowed to raise bills, and whether its £19.7bn investment plan, intended in part to fix leaky pipes and prevent sewage spills, will be approved.
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The company, which serves 16 million customers in the London and Thames valley regions, said it was working on the basis that an injection of new equity was “possible” but “should no longer be assumed”.
Weston said: “The challenges we face are well documented, but our operational and financial performance for the last year show good progress, and these positive results provide the right foundations on which to build and improve.”
Its parent company, Kemble, defaulted on its debt in April. Weston has previously said the company only had enough funds to operate until next spring.
The slow-burn crisis at Thames Water stepped up in March, when it said shareholders – which include the pension funds USS and Omers – had U-turned on £500m of promised funding, claiming Ofwat had made the company “uninvestable”.
The Guardian has since revealed that Thames’s board approved a £150m dividend just hours before the announcement.
Source: theguardian.com
