Thames Water secures £750mn commitment from investors

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Thames Water has secured a £750mn funding commitment from shareholders over the next 18 months but the troubled UK water company has warned it will need a further £2.5bn by 2030.

The equity injection depends on Thames Water making a new business plan, as well as conditions set by regulator Ofwat such as the extent to which the company is allowed to raise customer bills.

The company had already asked investors for £1.5bn last year but had received only £500mn by March. It is being closely monitored by the government, which is on standby in case it collapses.

“This further funding is subject to satisfaction of certain conditions,” the company said in a stock market announcement on Monday morning. “This includes the preparation of a business plan that underpins a more focused turnround.”

Thames Water provides water and sewage services for 15mn customers in London and surrounding areas and is under pressure to increase investment and improve services following a public outcry over sewage overflows and leaks.

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 regulator 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.

The company had been hit by rapidly rising interest rates over the past 18 months, which increased the costs of servicing its £16bn of debt. Net financing costs climbed by 24 per cent in a year.

The company’s crisis is driving a debate about whether the water industry, which was privatised under Margaret Thatcher’s government in 1989, should be renationalised to secure investment to upgrade ageing infrastructure and address the challenges of climate change.

Thames Water was owned by Australian investment firm Macquarie for just over a decade until 2017. During this time, the owners took 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 regulator Ofwat.

Equity injections into water companies have been rare since privatisation. 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.