Thames Water says it has enough money until May next year

Image source, Getty Images

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• Author, Nick Edser
• Role, Business Reporter, BBC News

• July 9, 2024

Debt-laden Thames Water said it had enough cash to fund its operations until the end of May next year, but efforts to raise new funds were continuing.

The UK’s biggest water company, which is facing doubts over its survival, said its debts had risen to £15.2 billion in the year to March.

Thames has also faced fierce criticism over its environmental record, with the company saying the number of sewage spills more than doubled last year.

Later this week, water regulator Ofwat is due to publish its draft decision on how much water companies can charge their customers for the next five years.

There has been speculation that Thames, which serves 16 million customers in London and the Thames Valley region, may have to be taken over by the government if it runs out of money.

The company says it has £1.8 billion in funding, which is enough to keep it operating until May 2025.

Thames reported a rise in annual profits to £157.3m, but boss Chris Weston said the company was facing a difficult time, with strengthening its financial position “a critical priority”.

Thames wants Ofwat to allow it to increase consumer bills by up to 44% between 2025 and 2030, with extra money promised for investment in environmental measures.

On Thursday, the regulator will release its initial decision on how much water companies can increase bills. There will then be several months of negotiations before a final decision in December.

Thames said it would speak to potential investors and lenders following Ofwat’s draft decision, but added that this was unlikely to be concluded before the regulator’s final decision.

An earlier plan put forward by the company was rejected by the regulator, raising questions about the company’s future as shareholders in Thames’ parent company, Kemble Water, later withdrew a proposed cash injection into the company.

In addition to its financial problems, Thames has also been the target of constant criticism for the number of sewage spills and water leaks affecting its customers.

Mr Weston, who joined Thames in January, said the company’s performance in this area was “not where it should be or where we want it to be”.

The number of sewage discharges increased from 8,015 to 16,990 last year, which was attributed to “heavy and prolonged rains”.

The 40% increase in rainfall compared to the previous year also led to an increase in the number of reportable pollution events from 331 to 350.

However, Thames said it had reduced leaks by 7%, reaching its lowest level ever.

‘Water quality is very important’

Image caption: Marlene Lawrence checks water quality daily

Marlene Lawrence is the founder of the Teddington Bluetits swimming group in south-west London.

She says the group is concerned about water pollution in the River Thames and “swims cautiously”.

“I verify [the water quality] daily,” she told BBC Breakfast.

The river is used by many different aquatic groups, such as canoeing clubs, which is why water quality is so important, she says.

“People send their children to learn to row and canoe and they won’t do it if they know the river quality is bad. That’s very important.”

Thames’ results showed it paid two dividends worth a total of £158.3m to two of its holding companies in March this year.

However, the company’s chief financial officer, Alastair Cochran, said the payments were to top up pension plans, adding they were “entirely consistent with normal practice”.

In March this year, Mr Weston said it was “eventually possible” that the company would be nationalised.

In Thames’ latest results, he said: “I continue to believe that a market-led solution that increases financial resilience is in the best interests of all stakeholders.”

However, he added that this “depends on securing a final regulatory determination that is feasible, bankable and investable, as well as affordable for our customers.”

Communities Minister Jim McMahon said on Tuesday there was “no nationalisation programme for the water industry”.

However, he added that “there is no legal provision that requires a water company to stop supplying water.”

“We need to be very clear that there is always a contingency in place.”

Mr McMahon added: “The days of putting shareholder interests above national interests, frankly, cannot continue, so we need to look at this and Thames needs to look at its own house and get it in order.”

If Thames comes under government control, there is speculation that it will be placed into a Special Administration Regime, in which financial advisers would manage the company on behalf of the government.

A precedent for this was set in 2021 when energy company Bulb went bankrupt and was placed under special administration.

Regardless of what happens to the Thames, water suppliers to their customers will continue to operate as normal.

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