Thames Water aims to secure urgent funding to prevent running out of money within weeks. On Monday, the company will seek court approval for a financial lifeline, as it faces cash depletion within four weeks.
Lenders have offered up to £3bn in short-term loans to buy time for restructuring the UK’s largest water and waste provider. Without court approval, Thames risks moving closer to temporary nationalisation, which could cost taxpayers around £2bn annually.
The water company may appeal Ofwat’s decision to allow a 35% bill increase over five years. Thames had requested a 53% rise but faces pressure due to past sewage discharges, leaks, and performance failures. Financial problems began 18 months ago when it sought funding to prevent collapse, with debt now at £17bn.
Despite its troubles, Thames assures customers that water supplies will continue unaffected. However, critics say previous shareholders burdened the company with debt, paid high dividends, and rewarded executives excessively. Calls for government intervention have intensified, with some arguing nationalisation is the only solution.
Lenders Offer a Last-Ditch £3bn Loan
In its survival efforts, Thames Water has negotiated a £3bn loan in two parts. The first instalment would keep the company afloat through autumn. The second depends on whether Thames appeals Ofwat’s bill rise to the Competition and Markets Authority (CMA), a process that could last up to a year. Thames has until 18 February to make its appeal.
Rothschild, the investment bank, is also seeking bids for a potential takeover to inject new capital. However, legal hurdles remain. A smaller group of lenders is challenging the terms of the financial package and proposing alternatives. The upcoming court hearing, expected to last four days, may be extended if necessary.
If court approval fails, the company may move closer to a Special Administration Regime, signaling temporary nationalisation. Government sources have already contacted consultants to prepare for this scenario. Consultancy Teneo estimates nationalisation could cost up to £2bn annually.
The debate over Thames’ future raises concerns about private sector infrastructure in the UK. Critics accuse Ofwat of poor regulation, keeping bills too low for too long and imposing large fines that limit funds for necessary repairs. Proponents argue that Thames’ collapse would send a negative signal to international investors, jeopardising the UK’s broader infrastructure investment plans.
Thames and its lenders agree the focus should be on resolving the crisis rather than dwelling on past mistakes. The CMA’s response to Thames’ appeal, if made, could significantly influence future regulation and investment strategies. With Thames seeking to invest £20bn over the next five years, the case may test the regulatory priorities of the CMA’s newly appointed chair.
