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A rescue plan for Thames Water, the UK’s largest water utility, has faced criticism from rival bidders who feel excluded from current negotiations. Thames Water is in a dire financial position, relying on an emergency loan from a consortium of lenders who are owed more than £13 billion. The lenders behind this lifeline have firm control over the company’s future, frustrating other interested parties such as Hong Kong-based CKI Holdings and UK-based Castle Water, both of whom claim their competing proposals have been sidelined.
The utilities provider serves 16 million customers but is burdened with nearly £20 billion in debt. Its existing lenders, operating as London and Valley Water, are engaged in exclusive talks with government regulators aimed at securing a rescue package. This deal involves writing off 25% of the lenders’ debt and injecting over £4 billion in new funds. However, the agreement would require extending leniency on regulatory fines related to pollution incidents. The fear is that, without this intervention, Thames Water could enter government-supervised administration early next year, potentially triggering an even greater write-off.
CKI Holdings, which already owns Northumbrian Water and UK Power Networks, along with Castle Water, have voiced concerns about the exclusionary nature of the discussions. A Barclays analysis suggested that if the lenders’ proposed rescue plan goes forward, customers’ bills could increase by nearly 20% over the next five years. Barclays highlights that the plan would make customers responsible for some operational and financial risks and require regulators to be more flexible on pollution penalties. The lenders, however, strongly dispute Barclays’ findings and state that CKI was given ample opportunity to submit a credible bid during a year-long competitive process.
Concerns extend beyond financial issues. Barclays acknowledges that a potential sale involving CKI, a China-linked investor, raises national security questions. The report cites Sir Simon Gass, former head of the UK’s Joint Intelligence Committee, who warned that such a transfer might give Beijing access to sensitive data on consumers. Meanwhile, Castle Water has proposed injecting more than £1 billion more than the lenders’ offer, claiming its plan would directly upgrade Thames Water’s infrastructure and reduce pollution. However, some insiders question the seriousness of Castle Water’s proposal, as it has not yet been formalized.
Criticism is not limited to potential bidders. Economist and infrastructure specialist Professor Dieter Helm argues that the current debt holders prioritize recovering as much of their loans as possible rather than the company’s or customers’ interests. He notes that the lenders’ plan could delay a return to proper environmental standards for sewage spills and leaks for over a decade. Professor Helm advocates for a government-led Special Administration Regime (SAR) that might allow a deeper debt restructuring than the lenders’ proposed 25% write-off. The government, however, is wary of an SAR due to its potential short-term costs, which could burden public finances amid fiscal constraints.
Despite these tensions, the lender group remains optimistic that ongoing talks with Ofwat and the Treasury will yield an agreement by December. The outcome of these discussions will crucially determine Thames Water’s future and how its challenges are managed in the years ahead
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