Engineers from Thames Water’s leak search team unload equipment from a truck during the night shift on Wednesday, May 2, 2023, in London, England.
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LONDON — British regulators on Thursday took the unprecedented step of placing water companies in London and a large swath of southern England into special measures as the company seeks new investor funding to shore up its future.
Regulator Ofwat said Thames Water will be under intense scrutiny and must reassess its plans to improve operational performance, delivery and financial resilience. Ofwat approved 16.9 billion pounds ($21.8 billion) of spending by the company to invest in improving customer service and the environment – an amount less than the 19.8 billion pounds Thames Water requested.
Meanwhile, the regulator allowed the company to raise customer bills by an average of £99 a year over the next five years, almost half of what it asked for.
In a statement on Thursday, Thames Water said its spending proposals aimed to “maintain a reliable supply of safe, high-quality drinking water and eliminate and effectively treat wastewater in London, the Thames Valley and counties now and in the future.”
company question Ofwat stated that its business plan was “inadequate” but said it would provide further evidence to the regulator to support its proposals, noting that a final decision would not be made until December 2024.
The crisis-hit company, which has more than 16 million customers, is seeking to avoid outcomes that include a temporary nationalization or spin-off. This spring, shareholders reject It bid for a £500 million equity injection, while its parent company Kemble breach of contract.
Thames Water is owned by a consortium of pension funds, sovereign wealth funds and private equity institutional shareholders. Its largest outside shareholder is the Ontario Municipal Employees Retirement System, one of Canada’s largest pension plans.
The company’s arrears have ballooned over the past two decades, Wednesday report Its net debt was £15.2bn in the year to March 2024. Will run out.
Thames Water and other UK utilities harsh criticism The discharge of sewage into UK waterways, including the River Thames, has increased dramatically.
Thames Water chairman Adrian Montagu said on Wednesday the company’s plans would attract “much needed investment”, adding that he believed it was possible to “turn around the business”.
Montague said in the company’s results that the UK water industry would need to significantly increase investment in the coming years and compete for debt and equity in “a very competitive market at a time of increased regulatory and political uncertainty and risk”.
Aerial view of sewage being treated at Thames Water’s Longreach sewage treatment plant in Dartford, UK, on August 10, 2023.
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He added that achieving a “market-led solution” would require working with regulators and government to achieve a turnaround and ensure investors have an incentive to continue investing in UK water companies.
S&P Global dealt a further blow to the company on Wednesday as place Its A and B-rated debt is at risk of a downgrade, which is said to reflect a belief that Thames Water may not be able to maintain sufficient liquidity, raising concerns about a “junk” rating.
S&P said the company’s position was under additional pressure due to the need for a significant capital investment program, which would offset free operating cash flow and limit its ability to deleverage.
Correction: The title of this article has been updated to accurately reflect Thames Water’s total debt converted into US dollars.
