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Thames Water said its shareholders would no longer offer £500 million of new shares by the end of the month, raising concerns about the future of the UK's largest water company.
Shareholders, which include Chinese and Abu Dhabi sovereign wealth funds, as well as British and Canadian pension funds, fear conditions imposed by industry regulator Ofwat have made the business “uninvestable”, Thames Water said following crisis talks on Wednesday evening.
The £500m was the first part of a commitment made by shareholders last July to pump £750m this year into Thames Water, which is saddled with a £18.3bn debt pile, faces fines over its sewage discharge and needs billions of pounds to fix its obsolescence. infrastructure.
Thames Water has lobbied Ofwat to agree sharp increases in water bills as well as concessions on regulatory fines and agree it can continue paying dividends.
Shareholders' unwillingness to provide new money raises the possibility that Thames Water, which supplies about a quarter of the UK's population, could be temporarily nationalized under a government-imposed special management regime.
Chris Weston, the utility's chief executive, told Radio 4 that private administration was “still a long way off” and could be avoided if shareholders agreed to provide funds. The company said it has £2.4bn of cash and other financing facilities on hand.
In a sign of the standoff between shareholders and the regulator, Offwat on Thursday urged Thames Water to “pursue all options to acquire more equity for the company to improve the company’s performance for customers”.
Thames Water shareholders have hit back at Ofwat, accusing it of failing to provide the “necessary regulatory support” for a business plan that would have “addressed the root cause of the challenges faced by Thames Water without the need for taxpayer funding”.
Thames Water, which was privatized by Margaret Thatcher's government in 1989, has come under increasing financial pressure as rising interest rates make it more expensive to service its debt.
The company is under pressure to modernize its aging infrastructure, faces intense public criticism and is grappling with challenges to its business caused by climate change.
The company said talks with Ofwat and other stakeholders are ongoing, adding that it will pursue all options to secure new investments “from new or existing shareholders.”
Thames Water was thrown into turmoil last June when chief executive Sarah Bentley resigned after a disagreement in the board over its turnaround plan. In December, Thames Water announced that Weston, the former head of British Gas, would be its permanent replacement.
The company said it remains hopeful of agreeing a business plan with Ofwat that is “affordable to customers, deliverable and fundable for Thames Water, as well as investable for equity investors”.
Thames Water has already received £500m from shareholders in the form of a loan to its parent company, Kemble Water. Kemble Water said on Thursday that shareholders' refusal to provide new money meant it would be unable to make further interest payments on a £190 million loan due by the end of April.
