Signage for British utility company Thames Water at a repair site in London, on June 28.TOBY MELVILLE/Reuters
Thames Water said its investors had agreed to inject £750-million (about $1.3-billion) into the company, helping to stave off the threat of nationalization, but Britain’s biggest water utility warned it would need further investment in the years ahead.
Weighed down by £14-billion of debt and under pressure over sewage releases into British rivers and seas, Thames sought to end weeks of speculation about its future, saying it was not close to needing a government rescue.
Asked whether Thames Water would need to be put into the government’s special administration regime, interim co-chief executive Cathryn Ross said: “Absolutely not.”
“We have £4.4-billion of capital sitting there, we can draw down on that, we’re absolutely not close to that trigger,” she told BBC Radio.
But there could be further challenges in future for a company which serves around 15 million customers, more than a fifth of Britain’s population.
The £750-million of equity Thames Water will receive between now and April, 2025, is less than the £1-billion it had said it needed last year, and is subject to the company improving a business plan underpinning its turnaround.
It also warned in its statement on Monday that over the 2025-2030 period it would need further equity of around £2.5 billion.
Thames Water said its shareholders, which include Ontario Municipal Employees Retirement System, Britain’s Universities Superannuation Scheme and China Investment Corp., “acknowledge” that delivering the turnaround plan will require further funds.
Thames Water’s debt problem has become far more challenging as over half of it is linked to inflation and the cost of servicing it has surged owing to the rapid rise in interest rates over the past 18 months.
The company’s performance has dropped in recent years but its debt levels mean it has little wiggle room to fund the upgrade of its aging infrastructure.
Concerns about the speed and effectiveness of its turnaround plan surfaced in June when its CEO abruptly quit and it brought in two new interim co-chief executives and a new chairman.
“The additional investment announced today is the largest equity support package ever seen in the U.K. water sector and underscores our shareholders’ commitment to delivering Thames’ turnaround,” chairman Ian Marchant said in a statement.
Some Thames Water bonds rose as much as two pence in the pound after the new investment was announced on Monday.
The company also published its results on Monday for the year to the end of March, which showed its gearing level fell to 77 per cent from 80 per cent. Core earnings (EBITDA) fell 3 per cent to 1.1 billion on revenue which grew 4 per cent to £2.3-billion.