Engineers from Thames Water’s leak search team unload equipment from a lorry during the night shift in London, England, Wednesday, May 2, 2023. The chief executive of Britain’s largest water supplier resigned on Tuesday, effective immediately.
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Britain’s government has held emergency talks over the fate of Thames Water, the country’s largest water supplier, and said it was prepared for any outcome, including temporary nationalization, as the company is saddled with huge debts.
Thames Water, which supplies water to about 27% of Britain’s population, said it has strong liquidity and “continues to work constructively with shareholders” to help fund the £1 billion ($1.3 billion) new capital it needs to operate. share capital.
A government official said the government had held talks with regulator Ofwat about the matter, while Water Minister Rebecca Pow said the government would act to ensure water continued to flow regardless of the company’s financial situation.
“Thames Water is doing a lot of work behind the scenes to make sure customers are not impacted and if necessary we have a process in place to take us to the next stage,” she told parliament on Wednesday.
Water companies in England and Wales have become a huge political headache for Prime Minister Rishi Sunak’s Conservative government, sparked by a public outcry over the discharge of sewage into rivers and seas and rising bills. Questions have been cast over the Tories’ privatization of the industry in 2017. in 1989.
Sky News had earlier reported that under contingency plans being drawn up, Thames Water could be placed under “special administration” – effectively state ownership – if it collapsed with £14bn of debt.
This happened in 2021 with the energy supply industry, which, like water, was a privatized regulated industry when the government bailed out energy supplier Bulb after its collapse, a deal that cost taxpayers billion pounds.
When asked specifically about Thames Water’s financial situation, Minister Pao said it was a problem for its owners, which include a Canadian pension fund.
“We need to make sure Thames Water survives as an entity,” Business and Trade Minister Kemi Badnock told Sky News. “My government colleagues are looking at what we can do.”
Ofwat said it had been in talks with Thames Water about the need for a credible plan to turn around the business.
dirty beach
Clean water campaign groups have accused water companies of failing to invest in infrastructure. Dividend payments to investors and high salaries and bonuses to water industry executives have further fueled public anger.
The opposition Labor Party condemned the situation.
A spokesman for Labor leader Keir Starmer said: “The public should not be left to pick up the pieces or pay for the Conservative Party’s failure.”
Thames Water’s shareholders include the Ontario Municipal Employees’ Pension System, the UK University Pension Plan and China Investment Corporation. The company said it was working to secure the additional capital needed to support its turnaround.
Chief executive Sarah Bentley stepped down immediately on Tuesday after spending two years trying to revive the company’s fortunes, in a sign of the pressure on the company.
She is replaced by two co-chief executives, chief financial officer Alastair Cochran and former Ofwat boss Cathryn Ross, who has been with Thames Water since 2021 .
One of Thames Water’s bonds due in 2026 is trading at distressed prices, according to Refinitiv data, a sign of mounting pressure on the company to weigh on its debt.
Its debt of around £1bn is due to be repaid by the end of 2024, among other loans. Restructuring specialists Alix Partners is advising the company, The Daily Telegraph reported.
UK-listed water operator Severn Trent, Pennon Group and united utilities Its capital is better than that of Thames Water, but the problems mean a “strengthened regulatory environment”.
Daily headlines about rivers and beaches being polluted by sewage from water companies look set to make water a major issue in the next general election, expected next year.
Such sewage discharges should only occur during unusual rainfall to prevent sewage from backing up into homes, but campaigners say water companies are releasing sewage much more often than they should.
Water companies in England alone will discharge untreated sewage into rivers and seas 301,091 times in 2022, an average of 825 a day, according to the Environment Agency.
Thames Water said in its annual report in October that it had not paid dividends to shareholders for the past five years. However, former owner Macquarie Australia received £1.6bn in dividends in the decade to 2016, according to the Financial Times.