Thames Water has fallen short of its goal of raising £1bn of urgent funding, instead securing conditional agreement from its shareholders to inject £750mn of new equity.
The troubled UK utility said on Monday its investors had agreed to provide the £750mn by April 2025 if certain conditions were met.
These include a business plan “that underpins a more focused turnround” with targeted performance improvements and “appropriate regulatory arrangements” — an apparent reference to how much it is allowed to raise customer bills by the industry watchdog Ofwat.
Thames Water, which provides water and sewage services to 15mn customers in and around London, also warned on Monday that it would need a further £2.5bn from investors by 2030.
The company is being closely monitored by the government, which is on standby for a temporary nationalisation in case it collapses.
It had already asked investors for £1.5bn last year but received only £500mn by March.
David Black, Ofwat chief executive, told a House of Lords committee hearing last week that Thames Water was struggling to secure the remaining £1bn in the short term.
The group has come under pressure from rising interest rates, which have increased the financing costs on its £16bn debt pile, as well as a need to raise infrastructure spending following public outcry over sewage overflows and leaks. Net financing costs climbed by 24 per cent in a year.
Thames Water also received £35.7mn in fines for pollution between 2017 and 2023, according to the Environment Agency.
Fears about the company’s finances erupted last month after chief executive Sarah Bentley abruptly quit just two years into an eight-year restructuring plan. Cathryn Ross, a former chief executive of Ofwat, has been appointed co-interim chief executive.
Ross told the BBC on Monday morning that the company had £4.4bn of liquidity and was not at immediate risk of nationalisation.
“That’s absolutely enough to pay everything that we think we need to pay this year, next year and into the future,” she said.
Thames Water was owned by Australian investment firm Macquarie for just over a decade until 2017. During this time, the owners took out almost £3bn in dividends.
The company’s largest shareholder is now the Ontario Municipal Employees Retirement System, with a 31 per cent stake. Other investors include the UK’s Universities Superannuation Scheme, Chinese and Abu Dhabi sovereign wealth funds and infrastructure fund Aquila GP.
Thames Water is not the only water company struggling with debt. The finances of four other companies — Southern Water, SES Water, Portsmouth Water and Yorkshire Water — are also under scrutiny by Ofwat.
Equity injections into water companies have been rare since privatisation in 1989. But Yorkshire Water received £500mn from investors last month and Southern Water said on Friday it would seek £550mn from shareholders to shore up its finances.
Ofwat has said that if water company credit ratings fall to a certain level it will block shareholder dividends.