Thames Water at loggerheads with lenders over £190m loan

Chinese state-owned banks will play a pivotal role in the future of Thames Water as the utility provider remains at loggerheads with lenders in a stand-off over debt at its parent company.

Thames Water parent company Kemble Water Finance has a £190.0m loan which shareholders said they will be unable to repay when it matures on 30 April.

The lenders, which refused to extend the loan without a fresh equity injection from Thames Water's owners, were Chinese state-owned Bank of China and Industrial and Commercial Bank of China, as well as Allied Irish Banks and Dutch lender ING, according to the Financial Times.

In the case of a default, the two Beijing-owned banks will become shareholders of Thames Water amid tensions over Chinese investment in Britain, with the UK moving to restrict Chinese investment in critical infrastructure and forcing telecommunications providers to strip out Huawei equipment from the nation's communications network.

Thames Water's shareholders backtracked on an offer to provide £500.0m in fresh equity just last week, indicating their willingness to take a roughly £5.0bn hit, with the refusal to provide new funds also leaving the government and regulator Ofwat with somewhat of a dilemma - the only way they can stop investors walking away is by agreeing to concessions, which would be paid for through bill increases, at a time of a public outcry over sewage pollution and other service failures.

The shareholders have asked Ofwat to green-light a 56% real-terms increase in bills by 2030, as well as asking it to grant leniency on dividend rules, pollution fines and investment plans. Ofwat was due to make a draft decision in June, with a final ruling slated for early 2025.

Reporting by Iain Gilbert at Sharecast.com