Water company Thames Water is set to request an emergency cash lifeline in court on Monday. The decision comes as the debt-burdened company edges closer to running out of cash in just four weeks’ time. Lenders have offered a total of £3bn in short-term loans to allow Thames more time to complete a major restructuring. The company has been criticised over its performance with a series of leaks and sewage discharges. In addition, the company is grappling with poor historical regulations, greedy shareholders, climate change and management failure. Thames Water’s debt currently stands at around £17bn.
With a failure to secure approval for the emergency cash, Thames Water risks moving closer towards temporary nationalisation, costing the UK government around £2bn per annum. While the company evaluates the regulator Ofwat’s decision further, Thames Water’s lenders are providing a further loan of up to £3bn, split into two payments. The first loan is anticipated to get the company through to the autumn, while the second payment is being. Considered by the company for use if it chooses to appeal Oftwat’s 35% bill increase to the Competition and Market Authority. Thames Water has until February 18 to launch that challenge.
Thames Water has been grappling with financial problems for about 18 months, looking for funding to avoid collapse. Investment bank Rothschilds is also soliciting bids to take over the company and generate much-needed funds. However, a smaller group of lenders is opposing the termsof the lifeline being proposed providing an alternative cause. Thames Water has emphasized that despite any developments, it will continue to provide services to its 16 million customers uninterrupted. Thames’s case has placed significant questions on the future of the key infrastructure providers.
The company stresses that regardless of its fate, it does not wish to be on the government’s books. Proponents have advocated for the company’s nationalisation due to its growing debt, taking significant dividends while offering executives handsome salaries, and demands for increased payments from customers despite its failing services. Some argue that the poor regulation was responsible, as bills were kept too low for too long, while others argue that imposing fines further deprives the company of funds required to fix its issues. Thames has just two weeks left to appeal to the CMA to increase the allowable charges. The CMA’s chair was ousted last week, with ministers unimpressed by the regulator’s focus on growth. Thames currently requires more significant bills to invest £20bn over the next five years
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