Bosses at Thames Water, the UK’s largest water provider, say the company does not have the money to repay a £190m loan bill due next April.
Regulator Ofwat has reiterated concerns over the amount of money the firm’s parent company has borrowed, as the utility sits on a £14.7bn debt pile.
But senior executives at the company blamed its financial troubles on bills being kept at “very low” levels by the regulator in an appearance before the Environment, Food and Rural Affairs Committee of MPs on Tuesday.
The new chair of Thames Water, Sir Adrian Montague, told MPs: “Some of the problems that we’re now encountering were because the bills were kept deliberately very low over the last period.”
“It seems a case of ‘we would say that wouldn’t we’ but there is truth there,” he added.
Alastair Cochran, joint interim chief executive officer of Thames Water, told the committee it has £1.35bn of external debt, with £190m of this due to mature in April 2023.
When asked by MPs if the supplier’s holding firm had the money needed, he replied: “Not currently, no.”
Instead, the lenders due the money will be asked to extend the repayment date, Mr Cochran said.
If that extension isn’t granted spending cuts would have to be made to come up with the funds, he added.
Existing shareholders – who include the UK’s largest pension scheme, the Universities Superannuation Scheme – would also be asked for more money with new shareholders sought if no financing from current investors is forthcoming, he added.
Whole water sector in bad shape
Bosses of Ofwat also appeared before the committee and said Thames Water was an “outlier” due to its level of borrowing.
But the problem was not isolated to the company, they admitted.
“We also agree that the finances of the sector are not in the shape that they ought to be,” Ofwat chief executive David Black said.
“We think that putting the public interest first needs to come much clearer in terms of the way that companies are acting.
“And so we think they haven’t met public expectations. That’s very clear.”
Thames Water plans for customers to pay for improvements
Thames Water was revealed by Sky News to be on the brink of collapse in late June before securing more funding from shareholders in July.
New executives, appointed after the story broke, told the committee in July that they were moving away from the previous eight-year governance plan to a new three-year turnaround blueprint to improve the company’s finances.
But today the same committee was told that the plan wouldn’t work as there was too much to do.
“This turnaround will take some time and we will not completely complete the job in three years”, Mr Cochran said.
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The utility has requested a 40% increase in bills in a business proposal submitted to Ofwat, contingent on tackling leaks, customer complaints, supply interruptions and pollution.
While investment may initially be made by shareholders it’s the customers who will have to pay for improvements in the water system through their bills, Mr Cochran said.
“Ultimately, if we want better service, then there is a price to be paid,” he added.
