Thames Water crisis deepens as shareholders refuse to give £500 million cash injection

28 March 2024, 10:08

The Thames Water crisis has deepened
The Thames Water crisis has deepened. Picture: Alamy

By Emma Soteriou

The Thames Water crisis has deepened after shareholders refused to deliver an initial £500 million cash injection due to an "uninvestible" business plan.

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Thames Water is the country's largest water company with around 15 million customers across London and the south east.

Its funding plan, which was drawn up last July, was subject to conditions including a business plan that is supported by "appropriate regulatory arrangements".

But regulations being imposed by industry watchdog Ofwat "make the PR24 plan "uninvestible", the company said.

"The first £500 million of the new equity that had been anticipated will not be provided by Thames Water's shareholders by 31 March 2024," Thames Water said.

It said it was in ongoing talks with industry regulator Ofwat to secure regulations that are "affordable for customers, deliverable and financeable for Thames Water, as well as investible for equity investors".

Once a new regulatory plan is agreed the supplier is planning to "pursue all options to secure the required equity investment from new or existing shareholders".

Read more: Thames Water accused of acting like 'rogue traders' after 136% surge in sewage spills lasting over a day

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Last July, Thames Water agreed a rescue funding plan with shareholders - including the Universities Superannuation Scheme (USS), China's sovereign wealth fund, a Canadian pension fund and the BT Pension Scheme - that would see them pump in £750 million, with the first £500 million due by the end of this month.

But the firm's nine investors said in a joint statement that Ofwat "has not been prepared to provide the necessary regulatory support" for their funding and turnaround plan.

"Shareholders and Thames Water have been working with the regulator Ofwat for over a year on how to address the complex challenges facing the business," they said.

"These include both meeting current funding demands and the urgent need for substantial investment to improve performance."

It is understood that Ofwat has refused to bow to the water giant's demands for concessions, said to include a 40% bill hike for customers, an easing of capital spending requirements as well as leniency on regulatory penalties.

Thames Water managing director Chris Weston said: "I'd like to reassure our customers that, despite this announcement, it is business as usual for Thames Water.

"Our 8,000 staff remain committed to working with our partners in the supply chain to provide our services for the benefit of our customers, communities and the environment."

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Following the announcement, Chancellor Jeremy Hunt said the Treasury will "continue to monitor Thames Water very carefully".

The company has been fighting to secure its future since last summer, after a funding crisis left it on the brink of emergency nationalisation.

Regulator Ofwat said the company must now seek further funding for its turnaround plan, adding that "safeguards" were in place to protect services to households.

An Ofwat spokesman said: "Safeguards are in place to ensure that services to customers are protected regardless of issues faced by shareholders of Thames Water.

"Today's update from Thames Water means the company must now pursue all options to seek further equity for the business to turn around the performance of the company for customers."

He added: "Thames Water is a business with a regulatory capital value of £19 billion, with £2.4 billion of cash/liquidity available, and an annual regulated revenue of £2 billon and new leadership team."

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