Thames Water on the brink of temporary nationalisation after government objects to rescue deal
Thames Water is reportedly on the brink of temporary nationalisation after the Environment Secretary cast doubt on a £10 billion rescue deal for the embattled supplier.
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Emma Reynolds is understood to have written to water regulator Ofwat on Monday warning the current bid tabled by Thames Water creditors would place an “undue burden” on customers.
The Government’s misgivings over the deal comes as Ofwat is said to have been close to accepting the offer from bidding consortium London & Valley Water, which has proposed injecting £10 billion into debt-laden Thames Water in return for any new fines over sewage leaks being waived for four years.
Thames Water – Britain’s biggest water supplier with 16 million customers – is hoping to secure the deal to stave off temporary nationalisation after being left close to collapse by nearly £20 billion of debt.
It has also faced a series of hefty fines for its poor environmental performance in recent years - a theme which was explored in the documentary 'Dirty Business'.
A rescue bid by creditors is seen as the final realistic option on the table to avoid being placed into the Government’s so-called special administration regime after a previous rescue deal with US private equity giant KKR collapsed in May last year.
Administrators have already been lined up to step in if needed.
Ms Reynolds’s criticism of the deal centres on concerns that customers will lose out under the creditors’ offer, according to The Times, which first reported the details of the letter.
It is thought she raised worries that the creditors’ proposal was “weak”.
But the Government has repeatedly said it prefers a “market solution” over temporary nationalisation.
Ofwat and the Department for Environment, Food and Rural Affairs have been approached for comment.
The letter from Ms Reynolds comes in a difficult week for Prime Minister Sir Keir Starmer, with Andy Burnham – the mayor of Greater Manchester – hoping to win the Makerfield by-election on Thursday, which would pave the way for him to launch a leadership challenge.
Mr Burnham recently signalled he could bring in a 10-year plan to renationalise the water industry, saying reform is needed to put the public interest first.
A Thames Water spokesperson said: "It is positive that the Secretary of State has provided feedback to Ofwat in relation to the London & Valley Water plan.
"We will continue working with all parties to reach an agreement that supports long-term financial stability and delivers better outcomes for customers and the environment.
"We believe that a market-led solution is the best way to support that outcome and ensure the uninterrupted delivery of our biggest infrastructure upgrade in 150 years.
"This record investment focuses on what customers have told us matters most – maintaining safe, high-quality drinking water, fixing leaks, and upgrading sewage treatment works and network to protect our rivers.
"Our half-year results showed a 20% reduction in pollutions, reflecting the impact of our focused improvement programmes.
"We’re also facing more extreme weather, as evidenced by recent record-breaking temperatures in May. It’s therefore vital that we keep the taps flowing for millions of Londoners and our proposed Teddington Direct River
"Abstraction project would play a critical role, supplying up to 75 million litres of water each day during times of drought.
"It is a key part of the country’s plan to secure water supplies for the future and we remain confident that Teddington Direct River Abstraction remains one of the best value options to deliver vital drought resilience for London.”