Shareholders have backed out of plans to inject the first £500m of funding into troubled utility Thames Water as industry regulations make its business plan “uninvestable”. Thames Water – the UK’s biggest water supplier with 15 million households across
London and the South East – said the funding plan drawn up last July was subject to conditions, including a business plan that is supported by “appropriate regulatory arrangements”. The company has been battling to secure its future since last summer, with a funding crisis leaving the debt-laden firm on the brink of emergency nationalisation. They have been left with debts of nearly £15bn, while it has also missed sewage spill and leakage targets with the bosses coming under intense scrutiny over the firm’s performance. This includes shareholder payouts, with Thames Water agreeing to pay a £37.5m dividend in October last year. Last summer, a rescue funding plan was agreed with shareholders, including a Canadian pension fund and China’s sovereign wealth fund, that would see them pump in £750 million, with the first £500 million due by the end of this month. But 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. However, the firm has now said the regulations being imposed by industry watchdog Ofwat “make the PR24 plan “uninvestible”, and as a result the shareholder support letter from last July “has not been satisfied”. “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,” it revealed. Thames Water 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”. It said once the new regulatory plan is agreed with Ofwat, it “intends to pursue all options to secure the required equity investment from new or existing shareholders”. Chris Weston, chief executive of Thames Water, 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.” Ofwat have now said the water company must now seek further funding for its turnaround plan, but sought to assure 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 billion and new leadership team.” In a joint statement, Thames Water’s nine investors claimed that Ofwat had “not been prepared to provide the necessary regulatory support” for their funding and turnaround plan. They insisted their funding agreement “was a solution which addresses the root cause of Thames Water’s challenges without the need for any taxpayer funding”. They added: “However, after more than a year of negotiations with the regulator, Ofwat has not been prepared to provide the necessary regulatory support for a business plan which ultimately addresses the issues that Thames Water faces. “As a result, shareholders are not in a position to provide further funding to Thames Water.” More follows on this
BREAKING news...