Thames Water’s rescue deal by lenders should be rejected, and the government should take it back into public control, according to an influential group of MPs, reports BritPanorama.
A report by the Environment, Food and Rural Affairs (Efra) Committee indicated that the £10 billion takeover plans by a consortium of over 100 creditors lack “the interests of the public, the company or the environment at heart.” Thames Water is the UK’s largest water supplier, serving 16 million customers.
The cross-party committee expressed concern that the top priority for the bidders, called London & Valley Water, is to “extract immediate value from Thames Water, not steer it to long-term success.”
Moreover, the MPs highlighted a worrying lack of transparency regarding the numerous creditors involved in what they termed an “opaque” consortium.
The rescue plan proposed by creditors, which include UK and US investment companies like Elliott Management and Apollo Global Management, is viewed as the final realistic option to prevent Thames Water from entering a special administration regime following a previous deal with US private equity giant KKR that collapsed in May last year.
Creditors who collectively hold about £17 billion of Thames Water’s debt, amounting to over £20 billion in total, have been sent back to the drawing board after former environment secretary Emma Reynolds asserted in June that their proposal did insufficiently protect customers or the environment.
The Efra Committee suggested that legislative changes are required to empower the government to initiate a special administration based on performance grounds, without awaiting the company’s insolvency, a route that may provoke legal challenges from Thames Water’s creditors.
According to the MPs, Thames Water is now trapped in a “doom loop.”
Alistair Carmichael, chairman of the Efra Committee, remarked: “We believe Thames Water can be turned around, but not by giving the keys back to the people who have been joyriding in the family car.”
He urged the government to reject offers from the company’s creditors that would alleviate fines for pollution and poor performance, asserting, “We do not believe this opaque consortium of 100 hedge funds, and others, has the interests of the public, the company or the environment at heart.”
Mr. Carmichael warned that if Thames Water’s financial situation does not improve, the company may enter special administration once its funds deplete by the year’s end. He articulated the perspective that this may be the necessary step to reset the company’s trajectory towards long-term sustainability.
He indicated that the government’s costs could potentially be recovered through a future sale of Thames Water once its finances and operational performance stabilize and a suitable buyer emerges.
Prime Minister Andy Burnham previously indicated a desire to implement a 10-year plan aimed at renationalizing the water industry, emphasizing the need for reforms prioritizing public interest.
However, the government has not publicly articulated its stance on any renationalization initiatives for Thames Water, despite the company’s warnings about its financial viability through year-end.
Mr. Carmichael also recommended enhancements to the Special Administration Regime to ensure regulators can intervene sooner and with legal authority when faced with chronic failures, while addressing loopholes that permit bondholders to control water companies without adequate oversight.
A spokesperson for London & Valley Water responded, stating, “This group of investors has never been in control of the company and has never received a dividend from Thames Water. They have stepped in to fund a significant revenue shortfall to ensure Thames Water’s record capital investment programme can continue without disruption.”
They added, “Our enhanced proposal will address all feedback from Ofwat and ministers and is the fastest route to fix Thames Water’s complex problems.”
A representative for Thames Water concluded that “Thames Water needs to be recapitalised and put on a firm financial footing… anything that delays the recapitalisation risks slowing the turnaround.”
