Thames Water races to secure investor backing ahead of delayed accounts
Britain’s biggest water company is this weekend corralling its shareholders to support a major capital injection as it prepares to publish delayed annual accounts.
Sky News has learnt that Thames Water has secured backing from investors including Omers, the Canadian pension fund, and the Universities Superannuation Scheme (USS) for a commitment to provide new equity.
Further details are expected to be announced to the stock market on Monday morning, according to insiders.
The size of the proposed initial equity-raise was unclear on Saturday although one source said it was unlikely to be greater than the £1bn which shareholders had already indicated they would provide last year.
The equity support letter is non-binding – meaning shareholders could yet change their minds – but is understood to have been seen as a condition of Thames Water’s auditor, PricewaterhouseCoopers, signing off the company’s accounts on a going concern basis.
A previous letter of this nature was cited in the company last September, when it 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.”
It was not clear whether the latest written support was materially different to that provided nearly a year ago.
Sky News revealed late last month that the government was drawing up contingency plans for Thames Water’s collapse amid growing doubts about its ability to service a £14bn debt-pile.
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‘Contingency plans are in place’
Industry sources believe it will now require an enormous debt-for-equity swap in order to avert temporary nationalisation.
David Black, the Ofwat chief executive, told member of the House of Lords this week that state ownership remained a long way off but acknowledged that Thames Water would probably seek to hike customer bills.
Any temporary nationalisation would involve placing Thames into a special administration regime (SAR) akin to that used when the energy supplier Bulb collapsed in 2021, sparking concerns that it could cost taxpayers billions of pounds.
Ultimately, the Bulb administration 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.
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.
This week, it was fined £3.3m for discharging raw sewage into river water near London Gatwick Airport.
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The company has been beset by management turmoil, with Sarah Bentley, its chief executive for the last three years, resigning less than two weeks ago.
It has since parachuted the City grandee Sir Adrian Montague in as its chairman, with Monday due to be his first day in the role.
The financial peril in which Thames Water finds itself has sparked calls from critics of the privatised industry to renationalise all of the UK’s major water companies.
Thames Water is owned by a consortium of pension funds and sovereign wealth funds, some of which have been privately sceptical about delivering additional funding.
Its largest shareholder is Ontario Municipal Employees Retirement System (Omers), a Canadian pension fund, which holds a stake of nearly 32%.
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
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 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 mismanagement.
Thames Water was contacted for comment on Saturday afternoon while a spokesman for its major shareholders declined to comment.
A millionaires’ playground, Poole in Dorset boasts some of the most expensive properties in the UK, and has been called Britain’s Palm Beach.
Away from the yachts and the mansions of Sandbanks, however, Poole is also a beer drinkers’ paradise, with 58 pubs in the parliamentary constituency alone.
But now many of Dorset’s pub landlords have joined a bitter backlash against rises in business rates of up to £30,000 in Rachel Reeves’s November budget.
Across the UK, it is claimed up to 1,000 publicans have even banned Labour MPs from their pubs, after the chancellor axed a 40% rates discount, introduced during COVID, from next April.
The row over the rises, brewing since the budget, came to a head in a clash between Kemi Badenoch and Sir Keir Starmer in the final Prime Minister’s Questions of 2025.
“He gave his word that he would help pubs,” said the Tory leader.
“Yet they face a 15% rise in business rates because of his budget. Will he be honest and admit that his taxes are forcing pubs to close?”
The PM replied that the temporary relief introduced during COVID – a scheme the Conservatives put in place and Labour supported, he said – had come to an end.
“But it was always a temporary scheme coming to an end,” he said.
“We have now put in place a £4bn transitional relief.”
Mark and Michael Ambrose, father and son co-landlords of The Barking Cat, said the increases are a ‘pub destroyer’
But in the Barking Cat Ale House in Poole, facing an increase in business rates of nearly £9,000 a year, the father and son co-landlords fear the rises could mean last orders for many pubs.
“We’re sort of in the average area at 157%, but we’ve got a lot of local pubs that are increasing by 600%, and another one by 800%,” Ambrose senior, Mark, told Sky News.
“It’s a pub destroyer. Pubs can’t survive these kinds of increases. It’s not viable. Most pubs are just about scraping by anyway. If you add these massive increases your profit margins are wiped out.
“We struggle as it is. You can’t have that kind of increase and expect businesses to succeed.
“Fortunately, the customers understand. But they still don’t want to have to spend an extra 30 or 50 pence a pint.”
Son Michael added: “It’s all back to front. It’s really these bigger pub companies and supermarkets that need to be facing increased taxes. We can’t handle them. They can.”
Michelle Smith, landlady of the Poole Arms, the oldest pub on the town’s quay, dating back to 1635, said: “Our rates per value is due to go up £9,000 in April, so it’s quite a deal.”
Michelle Smith, landlady of The Poole Arms, said all her prices are going up
“And we had a rates increase just gone as well,” she added. “So our rates had already increased over £1,000 a month last April. So another hit is quite considerable really.
“Prices definitely have to go up with all the different price increases that we’ve got throughout: business rates, wage increases, the beer goes up from the breweries. Everything is going up.”
Backing the publicans, Neil Duncan-Jordan, who became Poole’s first ever Labour MP last year, has written to the chancellor demanding a rethink. He said he is prepared to vote against the tax rise in the Commons.
“They’ve got to listen,” he told Sky News.
“They’ve got to listen to the high street, to publicans, people who run social clubs and listen to problems that they’re facing and the impact that these changes have made.”
Mr Duncan-Jordan said he was prepared to support an amendment to the Finance Bill, which turns the budget into law and had its second reading in the Commons last week.
Despite being suspended for four months for rebelling against welfare cuts earlier this year, he said: “I was discussing this with some MPs just this morning and I’ll be happy to support those. Sometimes you just have to say what you think is right.”
As chancellor, Ms Reeves has regularly raised a glass to pubs and promised to protect them from rising costs.
But Sir Keir has faced the wrath of a publican before, when he was thrown out of a pub in Bath during COVID by an anti-lockdown landlord.
This time, without a U-turn by the chancellor on the business rates increases, pub landlords fear the government has them over a barrel.
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