UK govt 'draws up plans' for Thames Water amid fears over £14bn debt pile

The UK government has reportedly started drawing up plans to temporarily take beleaguered utility Thames Water back into public ownership amid fears it cannot service its £14bn debt pile a day after its chief executive quit.

Local media reported that industry regulator Ofwat and government ministers were holding talks about potentially placing Thames Water into a special administration regime similar to that used after the collapse of energy supplier Bulb in 2021. Ofwat confirmed it had been in "ongoing discussions with Thames Water on the need for a robust and credible plan to turn the business around and transform its performance for customers and the environment".

The company serves 15m customers across London and the south-east of England and has criticised in recent years for funnelling out massive dividends to foreign shareholders while failing to tackle leaks that see 630 million litres of water a day wasted and pumping sewage into rivers and streams.

In a response on Wednesday, Thames Water said it was continuing to work "constructively with its shareholders in relation to the further equity funding expected to be required to support ... turnaround and investment plans".

It added that it had received the expected £500m in new funding from shareholders in March keeping Ofwat "fully informed on progress of the company’s turnaround and engagement with shareholders".

"Thames Water remains focused on delivering for its customers, the environment and stakeholders (and) continues to maintain a strong liquidity position, including £4.4 billion of cash and committed funding, as at 31 March 2023."

On Tuesday, chief executive Sarah Bentley resigned with immediate effect few days after it emerged that the leakage rate from the company’s pipes was at a five-year high and that she had given up her annual bonuses over its environmental track record.

The Daily Telegraph reported overnight that the company was still trying to raise £1bn from shareholders and that AlixPartners had been drafted in to advise on the company's operational turnaround plans.

Thames Water is owned by a consortium of pension funds and sovereign wealth funds, many of which are reportedly sceptical about stumping up more cash.

Its largest shareholder is the Canadian pension fund Ontario Municipal Employees Retirement System, which holds a stake of nearly 32%.

Others include China Investment Corporation, the country's sovereign wealth fund; the Universities Superannuation Scheme, the UK's biggest private pension fund; and Infinity Investments, a subsidiary of the Abu Dhabi Investment Authority.

Reporting by Frank Prenesti for Sharecast.com