Thames Water debt crisis

The UK’s largest water supplier risks collapse as it looks to secure extra funding for its debts.

Thames Water is working with shareholders and industry regulator Ofwat to develop an investment plan for its debt, currently at around £14.3 billion. 

The firm maintains its strong liquidity position, serving 15 million customers in London and Thames Valley, with £4.4 billion in cash and committed funding. 

However, inflation has increased interest rates of the debts, and Thames Water could be £10 billion short, revealed the Guardian. 

Full scope 

Water companies around the UK are suffering similar inflation-related debt crises and national alarm over the increased amount of sewage spills in the last three years. 

Water UK has initiated storm overflows and sewage reduction plans to help treat rivers and reservoirs of excess sewage, needing around £70 billion to fund these projects. 

With this push for sewage treatment plans and higher interest rates, net debt for water companies has increased in 2023: 

• United Utilities: £8.2 billion [accounts ending 31 March 2023]. 
• Anglian Water: £8 billion [accounts ending 31 March 2023]. 
• Severn Trent: £7.1 billion [accounts ending 31 March 2023]. 

In its official statement on the London Stock Exchange, Thames Water intends to continue its services for its customers. 

The firm increased its customer bills by 11.6% on 1 April 2023 to keep up with inflation. 

Emergency nationalisation 

Government ministers and Ofwat have started talking about the possibility of placing the water supplier into a special administration regime (SAR), putting it into temporary public ownership, according to Sky News. 

An Ofwat spokesperson said: “We have been clear that Thames Water has significant issues to address – their environmental record and leakage performance, for example, are poor. 

“Alongside the turnaround of their operational performance, they need to improve their financial resilience too.”

The Department for Business, Energy and Industrial Strategy (BEIS) was approached for further information. 

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