Ministers weigh contingency plan for collapse of Thames Water
The government has begun drawing up contingency plans for the collapse of Thames Water amid growing doubts in Whitehall about the ability of Britain’s biggest water company to service its £14bn debt-pile.
Sky News has learnt that ministers and Ofwat, the industry regulator, have started to hold discussions about the possibility of placing Thames Water into a special administration regime (SAR) that would effectively take the company into temporary public ownership.
Such an insolvency process was used by the government when the energy supplier Bulb collapsed in 2021, sparking concerns that it could cost taxpayers billions of pounds.
Ultimately, the Bulb administration is likely to have cost the public purse a far smaller sum, but water industry ownership restrictions which prevent consolidation mean this figure could be dwarfed if Thames Water was to fail.
The talks within Whitehall, which involve the Department for Environment, Food and Rural Affairs (DEFRA), Ofwat and the Treasury, remain at a preliminary stage and relate at the moment only to contingency plans which may not need to be activated.
Thames Water serves 15m customers across London and the south-east of England, and has come under intense pressure in recent years because of its poor record on leaks, sewage contamination, executive pay and shareholder dividends.
On Tuesday, Sarah Bentley, its chief executive for the last three years, resigned with immediate effect, saying: “The foundations of the turnaround that we have laid position the company for future success to improve service for customers and environmental performance.”
Sarah Bentley resigned as chief executive on Tuesday. Pic: John Alex Maguire/Shutterstock
In March, however, Sky News revealed that Thames Water was facing crunch talks over its finances and had hired Rothschild, the investment bank, and the law firm Slaughter & May, to explore financing options for the company.
The Daily Telegraph reported on Tuesday night that Thames Water was still trying to raise £1bn from shareholders and that AlixPartners had been drafted in to advise on the company’s operational turnaround plans.
One industry source said that regulators had also sought advice from restructuring experts in recent weeks, although their identity was unclear.
Taking Thames Water into temporary public ownership would inevitably fuel calls from critics of the privatised water industry to renationalise all of the country’s major water companies.
Thames Water is owned by a consortium of pension funds and sovereign wealth funds, many of which are understood to be sceptical about delivering additional funding.
Its largest shareholder is Ontario Municipal Employees Retirement System (Omers), a vast Canadian pension fund, which holds a stake of nearly 32%, according to Thames Water’s website.
Others include China Investment Corporation, the country’s sovereign wealth fund; the Universities Superannuation Scheme, the UK’s biggest private pension fund; and Infinity Investments, a subsidiary of the Abu Dhabi Investment Authority.
Hermes, which manages the BT Group pension scheme, is also a shareholder.
Thames Water employs about 7,000 people, and serves nearly a quarter of Britain’s population.
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Ms Bentley’s exit, which came soon after a row about her declaration that she had surrendered a controversial annual bonus, also reflects deeper divisions about how to address the mounting crisis at the company.
Earlier this year, she said she was “heartbroken” about the company’s historical failings, blaming “decades of underinvestment”.
Alastair Cochran and Cathryn Ross have been named joint interim chief executives as a search for Ms Bentley’s replacement is conducted.
Thames Water has been fined numerous times, and is facing a deluge of regulatory probes.
In 2021, it was hit with a £4m penalty for allowing untreated sewage to escape into a river and park, while in August 2021, it was ordered to pay £11m for overcharging thousands of customers.
The range of financing options available to Thames Water’s board – whose chairman, the former SSE chief Ian Marchant, is also due to step down imminently – appears to be limited.
Nearly £1.4bn of the company’s bonds mature by the end of next year, with Ofwat price controls meaning water companies have little scope to generate additional income.
In an investor update published last September, Ms Bentley said that “the difficult external environment has increased the challenge of our turnaround”.
A year ago, the company said it had agreed with shareholders the injection of £500m of new equity funding, with a further £1bn expected to be delivered by the end of next year.
The additional shareholder funding formed part of a £2bn expenditure increase, taking its total spending during the current five-year regulatory period to £11.6bn.
In its September announcement, Thames Water said shareholders had “further evidenced their support for [Thames Water] and its business plan through an Equity Support Letter where the shareholders have committed to hold investment committee meetings (for their respective institutions) as a path to obtaining approval (in the discretion of the investment committee) for funding their pro rata share of conditional commitments in respect of the further £1bn of additional equity which is assumed in TWUL’s business plan”.
“Whilst this is not a legal commitment to fund…the [Thames Water] board believes it is reasonable to incorporate this additional £1bn of equity funding in its assessment.”
The company has not paid a dividend to its owners for the last six years.
Thames Water is not the only major water company to face questions about its financial resilience and operational track record.
Ofwat has also been in talks with others, including Southern Water and Yorkshire Water, in recent years about strengthening balance sheets amid performance issues.
The financial collapse of Britain’s biggest water company, and its implications for the model of water ownership, would inevitably become a major political debating point in the run-up to the next general election.
Some critics of privatisation have demanded that the government consider mutual ownership structures, which would prohibit returns to shareholders and guarantee that profits would be reinvested in improving the sector’s dire performance, while upgrading water infrastructure assets.
In total, tens of billions of pounds have been handed to shareholders in water utilities across Britain since privatisation, stoking public and political anger given the industry’s frequent mishaps.
DEFRA, Ofwat and Thames Water were all contacted for comment on Tuesday evening.
World
Donald Trump threatens sweeping new tariffs on Mexico, Canada and China on first day in office
Conor McGregor has spoken out after losing a civil rape case as a feminist march was held in Dublin.
The MMA fighter was accused of raping Nikita Hand, who was awarded €248,603 (£206,000) in damages on Friday after a jury at Dublin’s High Court found McGregor assaulted her in a Dublin hotel in 2018.
Nikita Hand.
Pic: PA
Posting on social media, the 36-year-old said: “I know I made mistakes”.
It comes as hundreds of people in Dublin staged a demonstration in “utter solidarity” with Ms Hand.
Posting on X, McGregor said: “People want to hear from me, I needed time. I know I made mistakes. Six years ago, I should have never responded to her outreaches. I should have shut the party down. I should never have stepped out on the woman I love the most in the world. That’s all on me.
“As much as I regret it, everything that happened that night was consensual and all the witnesses present swore to that under oath. I have instructed my legal team to appeal the decision.
“I can’t go back and I will move forward. I am beyond grateful to my family, friends and supporters all over the world who have stayed by my side.
“That’s it. No more. Getting back to the gym- the fight game awaits!”
Conor McGregor (centre) and partner Dee Devlin leave the High Court in Dublin after he lost a civil case.
Pic: PA
Speaking outside court after the decision, an emotional Ms Hand said the two-week-long civil case had been a “nightmare” but that “justice has been served”.
“It’s something that I’ll never forget for the rest of my life,” she added.
In Dublin on Monday night, a march in support of Ms Hand was organised by the socialist feminist movement group Rosa to mark the International Day for the Elimination of Violence against Women.
The demonstration in Dublin.
Pic: PA
Ruth Coppinger (left) and Natasha O’Brien at the solidarity march.
Pic: PA
Participants chanted “stand with Nikita” and “no more fear, no more shaming, we reject your victim blaming” as they carried signs and banners through the capital’s streets.
Ruth Coppinger, a councillor and general election candidate, and Natasha O’Brien, who became a public figure after a soldier received a suspended sentence for assaulting her, both spoke at the event.
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Ms Coppinger said Ms Hand was “an incredibly brave woman” and that she was watching the event via a live stream.
Ms O’Brien was cheered as she said she’d been “in awe” of Ms Hand’s courage and that Ireland had let out a collective “sigh of relief” after the jury found in Ms Hand’s favour.
McGregor was accused of having “brutally raped and battered” Ms Hand.
She was taken in an ambulance to the Rotunda Hospital the following day where the paramedic who assessed her told the court she had not seen “someone so bruised” in a long time.
Following eight days of evidence, and three days of closing speeches and the judge’s instructions to the jury, the jury of eight women and four men spent six hours and ten minutes deliberating before returning their verdict.
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