The water company pushed bills up by 31 per cent earlier this year
Struggling supplier Thames Water has revealed it remains locked in in negotiations over its proposed bailout agreement with creditors whilst disclosing surging revenues and customer complaints as a result of bill hikes.
The debt-ridden company – Britain’s largest water provider serving approximately 16 million customers – described discussions as “positive” yet ongoing, with Government and regulators to finalise an arrangement that would revitalise the business and mend its damaged finances.
Thames Water is currently in discussions with a consortium of its principal creditors, known as London & Valley Water, which has put forward proposals to inject investment into the utility and cancel debts in exchange for more relaxed performance standards. However, Thames Water cautioned there remained a “material uncertainty” regarding whether the agreement would be finalised.
The company said: “Since the proposal was made, positive discussions are ongoing between the consortium, the regulators and Government, albeit there remain a number of items to be negotiated and agreed before a recapitalisation can proceed.”
The organisation is seeking to secure the arrangement to prevent temporary nationalisation after being pushed to the edge of failure by nearly £20 billion of debt. Its creditors – which include institutional investors such as Aberdeen, Elliott Management and Silverpoint Capital – are seen as the final realistic option on the table to avoid being placed into the Government’s special administration regime after a previous rescue deal with US private equity giant KKR collapsed in May. Administrators have already been lined up to step in if needed.
Chris Weston, chief executive of Thames Water, said: “We continue to work closely with stakeholders to secure a market-led solution that we believe is in the best interests of our customers and the environment. This in turn will allow the transformation of Thames to continue, a programme that will take at least a decade to complete and will restore the infrastructure and operations of the company.”
Half-year results from the provider revealed underlying earnings surged to £1.2 billion for the six months to September 30, compared with £715.1 million a year ago. Revenues rose by 42 per cent thanks to the bill increases, which it said also helped fund £1.3 billion of capital invested to fix leaks, cut sewage spills and improve water quality.
It said it cut pollution spills by a fifth but also revealed customer complaints had soared by three-quarters to 55,158 in the half-year after it hiked bills by a hefty 31 per cent in April.
The group swung to a £414 million pre-tax profit from losses of £149 million a year earlier. The results revealed that its net debt has ballooned to £17.6 billion from £15.8 billion a year ago, with Mr Weston stating the focus is on recapitalising the business due to its “weak” balance sheet.
Thames Water has sufficient funds to last until early next year. Its creditors, the bondholders, now effectively own Thames Water after the High Court approved a financial restructuring earlier this year through a loan of up to £3 billion to ensure it can continue operating until the summer of 2026.
It’s understood that discussions had slowed in the run-up to the autumn Budget on November 26, after which talks with the Treasury over the proposals are expected to pick up pace. The consortium is aiming to finalise a rescue deal before Christmas.
Meanwhile, it has been reported that Thames Water is considering whether to proceed with more than £2 million of so-called retention payments to senior executives. Alistair Carmichael, chairman of the environment, food and rural affairs select committee, wrote to Thames Water last week to inquire whether the money would be distributed.
The latest payouts are understood to total £2.46 million, and would be the second instalment after £2.46 million was given to 21 of its most senior managers earlier this year, sparking controversy given the supplier’s financial and environmental performance issues.
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