Thames Water creditors threaten legal action over nationalisation plans
A group of Thames Water creditors has threatened legal action should Britain’s new Prime Minister Andy Burnham proceed with plans to nationalise the struggling firm which faces debts of up to £20 billion, reports BritPanorama.
The warning comes as Burnham, who takes office on Monday, has consistently advocated for public ownership as the optimal solution for the company. Thames Water has been embroiled in controversy for years, facing public outrage over sewage discharges into rivers and seas, a direct consequence of successive owners failing to adequately invest in its ageing infrastructure.
The utility’s precarious financial state, with a looming deadline to run out of money by November, presents one of the first major challenges for the incoming government. International investors are closely monitoring the situation, viewing the new administration’s handling of Thames Water as a key indicator of its approach to financially distressed infrastructure assets.
The creditor group’s threat warns that nationalisation would prompt them to pursue outstanding debts through the courts, potentially burdening Burnham’s government with a multi-billion-pound bill amidst existing pressures on public finances. Mike McTighe, working with the creditor group to build a new board for Thames Water, stated that the group’s preference is to collaborate with Burnham to find a solution, which could include expanding public oversight of the company.
“We are keen to meet new ministers as soon as possible to discuss how we can work together in the best interests of customers, including by enhancing public control of the company’s operations,” he said in a statement.
Thames Water, Britain’s largest water company with 16 million customers across London and southern England, has for years been held up as the clearest symbol of the failure of Britain’s privatised water industry. The creditor group, including Invesco, Elliott Management, and Silver Point Capital, has been trying to convince the government to back its rescue deal, which involves writing off about half of Thames Water’s £20 billion ($27 billion) debt and investing £3.35 billion of new equity.
In return, the creditors want leniency over any environmental fines—a politically difficult concession for any government to make. The government has so far rejected that deal, and the creditor group has been working on improving its offer in recent weeks.
Should the government take Thames Water into its Special Administration Regime (SAR), a form of temporary public ownership, taxpayers would need to inject about £2 billion to keep the utility operating for the next 18 months, according to Thames Water’s management. The firm has claimed it has enough funding until autumn despite its debt mountain nearing £20 billion.
The UK’s biggest water supplier, serving 16 million customers across London and the South East, reported pre-tax profits of £226.4 million for the year ending March 31, a marked improvement from last year’s £1.65 billion loss. However, its full-year results showed debts swelled to £19.77 billion, up from £17.73 billion, as the group continued to draw down funds for capital investment.
Thames Water’s chief executive Chris Weston told The Sunday Times: “If they put us into a SAR, the government would have to fund us for the period of time that we were in the SAR.” An ally of Mr Burnham noted that if £2 billion is needed to keep the company afloat, the taxpayer deserves something in return—namely control—to fix the company and secure the water supply for thousands of families and businesses.
There is currently no precedent for a water company being placed into an SAR, though energy supplier Bulb was subject to similar measures in 2021 before its assets were sold to Octopus Energy, having been forced to repay £3 billion to the government as part of a pledge to return taxpayers’ funds received during its rescue.
This situation underscores the complexities of managing financial distress in essential utilities, with significant implications for consumers and the government alike.
