Thames Water calls for higher bills as it looks to stay afloat - report
Thames Water is lobbying both government and the regulator to allow it to raise bills, pay dividends and avoid swingeing fines, it was reported on Wednesday.
The utility is trying to stave off a potential takeover under the government’s special administration regime, which would involve a multibillion taxpayer bailout.
According to the Financial Times, officials at the Department for the Environment, Food and Rural Affairs have made contingency plans for the struggling business dubbed Project Timber.
One anonymous senior government figure told the FT: "The collapse of Thames is the last thing we want."
Thames Water is the country’s biggest water monopoly, supplying water and sewage services to 15m households in London and across much of the south.
But it has built up debts of around £18bn, which it is struggling to service.
It has also faced a public backlash over both the scale of its leaks, which are bigger than any other water company’s, and sewage discharge.
Investors have already provided a £500m loan to parent company Kemble Water.
The FT said equity holders in the utility were willing to inject a further £3.25bn into the business. But they would only do so if regulator Ofwat agreed to a series of measures that could prove unpopular with customers.
These include a 40% increase in household bills by 2030, lenience on regulatory fines and a relaxation of the recently tightened rules around dividends.
A source close to Thames Water told the FT: "The shareholders would be irrational to put any equity in if they don’t win concessions."
The source added that the company was "like a flooded room with only an inch of air at the top".
Thames Water paid Kemble a £37.5m dividend last October, in breach of rules banning water companies with poor financial records from making payouts.
However, Kemble needs the dividends to service debt.
The regulator is currently deciding whether to fine Thames for the payout. Some in the industry have warned that Kemble faces possible administration if it is not able to receive dividends, with a potential knock-on effect on Thames Water.
However, Ofwat told the FT that Thames Water was "ringfenced" and would not automatically follow Kemble into administration.
It continued: "Ofwat does not comment on speculation.
"It is for the company to secure shareholder backing to improve its financial resilience."
The government said: "We prepare for a range of scenarios across our regulated industries, including water, as any responsible government would."
Thames Water and Kemble declined to comment.