Engineers from a Thames Water leak hunting team unloads equipment from their van during a night shift in London, UK, on Wednesday, May 2, 2023. The chief executive of Britain’s biggest water supplier stepped down with immediate effect on Tuesday.
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The British government has held emergency talks over the fate of the country’s biggest water supplier, Thames Water, and said it is ready for any outcome, including temporary state ownership, as the company buckles under huge debts.
Thames Water, which supplies about 27% of Britain’s population, said it had strong liquidity and was “continuing to work constructively” with its shareholders to help raise the 1 billion pounds ($1.3 billion) of fresh equity it says it needs to operate.
The government has held talks with the regulator Ofwat about the situation, one government official said, while water minister Rebecca Pow said it would act to ensure water keeps flowing regardless of the company’s financial situation.
“There is a lot of work going on behind the scenes with Thames Water to ensure that customers will not be impacted and there is a process in place if necessary to move us to the next stage,” she told parliament on Wednesday.
Water companies in England and Wales have become a huge political headache for Prime Minister Rishi Sunak’s Conservative government amid a public outcry over the release of sewage into rivers and seas, and rising bills, which have raised questions over the Conservatives’ privatisation of the sector in 1989.
Sky News reported earlier that, under contingency plans being drawn up, Thames Water could be placed into a “special administration regime”, effectively state ownership, should it collapse under its 14 billion pound debt pile.
That happened in 2021 in the energy supply sector, which like water is also a privatised regulated industry, when the government rescued energy supplier Bulb after it collapsed, in a deal which cost taxpayers hundreds of millions of pounds.   Â
Asked specifically about the Thames Water’s finances, minister Pow said they were a matter for its owners, which include a Canadian pension fund.
“We need to make sure that Thames Water as an entity survives,” business and trade minister Kemi Badenoch told Sky News. “My colleagues across government are looking at what we can do.”
Ofwat said it had been in ongoing talks with Thames Water about the need for a credible plan to turn the business around.  Â
Dirty beaches
Clean water campaign groups accuse the water companies of failing to invest in infrastructure. Public anger has been further stoked by the payment of dividends to investors and large salaries and bonuses to water industry executives.
The opposition Labour party condemned the situation.
“It shouldn’t be left to the public to clean up the mess or pay the price for Tory (Conservative) failure,” a spokesperson for Labour leader Keir Starmer said.
Thames Water, which counts Ontario Municipal Employees Retirement System, the UK’s Universities Superannuation Scheme and China Investment Corp as shareholders, said it was working to secure the extra funds needed to support its turnaround.
In a sign of the pressure the company is under, Chief Executive Sarah Bentley stepped down with immediate effect on Tuesday after two years trying to revive its fortunes.
She was replaced by two co-chief executives, Chief Finance Officer Alastair Cochran and former Ofwat boss Cathryn Ross, who has been at Thames Water since 2021.
The mounting pressure at the company could be seen weighing on its debts, with Refinitiv data showing that one Thames Water bond maturing in 2026 was now trading in distressed territory.
Around 1 billion pounds of its debt is due to be repaid by the end of 2024, on top of other loans. Restructuring specialists Alix Partners are advising the business, the Daily Telegraph said.
Jefferies analysts said Britain’s listed water operators Severn Trent, Pennon Group and United Utilities were better capitalised than Thames Water, but the issues meant a “heightened regulatory environment”.
Daily headlines about rivers and beaches polluted by sewage released by water companies look set to turn water into a major issue at the next general election, expected next year.
Such releases of sewage are only supposed to happen during exceptional rainfall to stop it backing up into homes, but campaigners say water companies are discharging sewage much more often than they should.
In 2022, water companies in England alone released raw sewage into rivers and the sea 301,091 times, an average of 825 times a day, according to data from the Environment Agency.
Thames Water said in its annual report in October that it had not paid a dividend to its shareholders for the last five years. Previous owners Australia’s Macquarie, however, was paid a dividend of 1.6 billion pounds over the decade to 2016, according to the Financial Times.
