Ministers weigh contingency plan for collapse of Thames Water

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2 years ago

June 28, 2023

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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.”

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.

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.

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Why hastily declared ceasefires tend to be fragile

Published

1 day ago

June 24, 2025

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Why hastily declared ceasefires tend to be fragile

Ceasefires that are suddenly declared tend to be pretty fragile.

Stable ceasefires usually require a lot of preparation so that everyone on both sides knows what is supposed to happen, and – more importantly – when.

And they normally agree on how it will be monitored so one side cannot seize a quick advantage by breaking it suddenly.

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Without such preparations, and sometimes even with them, ceasefires will tend to be breached – perhaps by accident, perhaps because one side does not exercise full control over its own forces, perhaps as a result of false alarms, or even because a third party – a guerrilla group or a militia, say – choose that moment to launch an attack of their own.

The important question is whether a ceasefire breach is just random and unfortunate, or else deliberate and systemic – where someone is actively trying to break it.

Either way, ceasefires have to be politically reinforced all the time if they are to hold.

All sides may need to rededicate themselves to it at regular intervals, mainly because, as genuine enemies, they won’t trust each other and will remain naturally suspicious at every twitch and utterance from the other side.

This is where an external power like the United States plays a critical part.

If enemies like Israel and Iran naturally distrust each other and need little incentive to “hit back” in some way at every provocation, it will take US pressure to make them abide by a ceasefire that may be breaking down.

Appeals to good nature are hardly relevant in this respect. An external arbiter has to make the continuance of a ceasefire a matter of hard national interest to both sides.

And that often requires as much bullying as persuasion. It may be true that “blessed are the peacemakers”.

World

Five key takeaways from Volodymyr Zelenskyy’s interview with Sky News

Published

1 day ago

June 24, 2025

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Five key takeaways from Volodymyr Zelenskyy's interview with Sky News

Volodymyr Zelenskyy has given a wide-ranging interview to Sky News in which he was asked about the prospect of Russia attacking NATO, whether he would cede land as part of a peace deal and how to force Vladimir Putin to the negotiating table.

The Ukrainian president spoke to chief presenter Mark Austin.

Here are the five key takeaways from their discussion.

NATO ‘at risk of attack’

Mr Zelenskyy said plans for NATO members to increase defence spending to 5% of GDP by 2035 are “very slow” and warned Russia could attack a NATO country within five years to test the alliance.

“We believe that, starting from 2030, Putin can have significantly greater capabilities,” he said. “Today, Ukraine is holding him up, he has no time to drill the army.”

But while Mr Zelenskyy conceded his ambition to join NATO “isn’t possible now”, he asserted long term “NATO needs Ukrainians”.

US support ‘may be reduced’

Asked about his views on the Israel-Iran conflict, and the impact of a wider Middle East war on Ukraine, Mr Zelenskyy accepted the “political focus is changing”.

“This means that aid from partners, above all from the United States, may be reduced,” he said.

“He [Putin] will increase strikes against us to use this opportunity, to use the fact that America’s focus is changing over to the Middle East.”

On the subject of Mr Putin’s close relationship with Iran, which has supplied Russia with attack drones, Mr Zelenskyy said: “The Russians will feel the advantage on the battlefield and it will be difficult for us.”

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Trump and Putin ‘will never be friends’

Mr Zelenskyy was sceptical about Mr Putin’s relationship with Donald Trump.

“I truly don’t know what relationship Trump has with Putin… but I am confident that President Trump understands that Ukrainians are allies to America, and the real existential enemy of America is Russia.

“They may be short-term partners, but they will never be friends.”

On his relationship with Mr Trump, Mr Zelenskyy was asked about whether he felt bullied by the US president during their spat in the Oval Office.

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“I believe I conducted myself honestly. I really wanted America to be a strong partner… and to be honest, I was counting on that,” he said.

In a sign of potential frustration, the Ukrainian president added: “Indeed, there were things that don’t bring us closer to ending the war. There were some media… standing around us… talking about some small things like my suit. It’s not the main thing.”

Putin and peace talks

Mr Zelenskyy was clear he supported both a ceasefire and peace talks, adding that he would enter negotiations to understand “if real compromises are possible and if there is a real way to end the war”.

But he avoided directly saying whether he would be willing to surrender four annexed regions of Ukraine, as part of any peace deal.

“I don’t believe that he [Putin] is interested in these four regions. He wants to occupy Ukraine. Putin wants more,” he said.

“Putin is counting on a slow occupation of Ukraine, the reduction in European support and America standing back from this war completely… plus the removal of sanctions.

“But I think the strategy should be as follows: Pressure on Putin with political sanctions, with long-range weapons… to force him to the negotiating table.”

Russia ‘using UK tech for missiles’

On Monday, Mr Zelenskyy met Sir Keir Starmer and agreed to share battlefield technology, boosting Ukraine’s drone production, which Mr Zelenskyy described as a “strong step forward”.

But he also spoke about the failure to limit Russia’s access to crucial technology being used in military hardware.

He said “components for missiles and drones” from countries “including the UK” were being used by Russian companies who were not subject to sanctions.

“It is vitally important for us, and we’re handing these lists [of Russian companies] over to our partners and asking them to apply sanctions. Otherwise, the Russians will have missiles,” he added.

World

At least 25 people killed after Israeli forces open fire near aid trucks in Gaza, witnesses say

Published

1 day ago

June 24, 2025

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At least 25 people killed after Israeli forces open fire near aid trucks in Gaza, witnesses say

At least 25 people have been killed after Israeli forces opened fire towards people waiting for aid trucks in Gaza, according to witnesses and hospitals.

The Awda hospital in the Nuseirat refugee camp, which received the victims, said the Palestinians were waiting for the trucks on a road south of Wadi Gaza.

Witnesses told the Associated Press (AP) news agency Israeli forces opened fire as people were advancing to be close to the approaching trucks.

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The Awda hospital said another 146 Palestinians were wounded. Among them were 62 in a critical condition, who were transferred to other hospitals in central Gaza, it added.

In the central town of Deir al-Balah, the Al Aqsa Martyrs hospital said it received the bodies of six people who were killed in the same incident.

“It was a massacre,” one witness, Ahmed Halawa, said.

He said tanks and drones fired at people, “even as we were fleeing – many people were either martyred or wounded”.

Another witness, Hossam Abu Shahada, said drones were flying over the area, watching the crowds. Then there was gunfire from tanks and drones, leaving a “chaotic and bloody” scene as people attempted to escape.

He said he saw at least three people lying on the ground motionless and many others wounded as he fled.

The Israeli military did not immediately comment on the reports.

Philippe Lazzarini, the head of the UN’s Palestinian refugee agency, described the aid delivery mechanism in Gaza as “an abomination that humiliates and degrades desperate people”.

He added: “It is a death trap, costing more lives than it saves.”

A spokesperson for the UN’s Human Rights Office said: “The weaponisation of food for civilians, in addition to restricting or preventing their access to life-sustaining services, constitutes a war crime and, under certain circumstances, may constitute elements of other crimes under international law.”

Around 56,000 Palestinians have been killed during the Israel-Hamas war in Gaza, according to the territory’s Hamas-run health ministry. The ministry says more than half of the dead were women and children, but does not distinguish between civilians and militants in its count.

The war began after Hamas attacked Israel on 7 October 2023, when militants stormed across the border and killed around 1,200 people, mostly civilians, and took another 251 hostages. Most of the hostages have been released in ceasefire agreements.