Thames Water's creditors are prepared to pursue their bid for the debt-laden utility even if the incoming prime minister, Andy Burnham, brings the company under temporary nationalisation. A group of 100 institutional investors, holding approximately £14bn of Thames's senior debt, continue to discuss a £10bn rescue proposal with officials from the regulator Ofwat, holding meetings in recent days.
Rescue proposal faces opposition
Environment Secretary Emma Reynolds objected to the proposal in mid-June, arguing it would place an 'undue burden' on consumers. This objection pushes Britain's largest water company closer to a special administration regime (SAR), a form of temporary nationalisation. Creditors, however, view SAR as a process rather than a solution and would seek to buy Thames out of it, according to sources familiar with the matter, as first reported by the Financial Times.
Andy Burnham has called for 'greater public control' over Thames and indicated that nationalisation is a possibility. The future of Thames, which serves 16 million customers in London and the Thames Valley and is burdened by £17.6bn of debt accumulated since privatisation, will be one of the most pressing issues when Burnham enters Downing Street, expected within the next two weeks.
Key creditors and their stance
The lenders include US hedge fund Elliott Investment Management, run by billionaire Trump donor Paul Singer, along with Apollo Global Management, Silver Point Capital, BlackRock, and M&G. They have been attempting to take ownership of Thames without a SAR, after Thames's bosses failed to sell the utility to US investment group KKR last year. Thames has been struggling to avoid financial collapse for nearly three years and could run out of money in October.
The creditor group, London & Valley Water, argues that an SAR would require multiple billions of pounds of taxpayer money, with no clear timeline, creating further uncertainty for Thames's 8,000 workers and its supply chain. Their rescue proposal would inject £3.35bn of new equity and provide £3.25bn of fresh debt. Thames's investors would pay an upfront penalty and redress package of £850m to achieve investment grade status from ratings agencies.
Other bidders and government position
Other potential bidders, including Hong Kong-based CK Infrastructure Holdings (majority owner of Northumbrian Water) and Castle Water (which runs billing services for Thames's business customers), have called for Thames to be taken into an SAR. Four years ago, the government recovered almost the entire cost of temporarily nationalising energy provider Bulb after selling it to rival Octopus for £3bn.
Under an SAR, Thames would be run by an independent insolvency expert on behalf of taxpayers to maintain services before finding a buyer. Its debt and interest payments could be temporarily frozen, but the government would have a duty to seek maximum value for creditors.
Official statements
A Thames Water spokesperson said: 'We continue to work with all parties to reach an agreement that supports Thames Water's long-term financial stability and ensures the uninterrupted delivery of our biggest infrastructure upgrade in 150 years while continuing to meet the needs of our 16 million customers.'
A Defra spokesperson said: 'Thames Water customers have been let down for far too long, with 15 years of underperformance, increasing serious pollution, and customers left to pick up the bill. The secretary of state has written to Ofwat to outline her early views that she is not convinced the current proposal is good enough for consumers or the environment. We are prepared for any eventualities.'
The creditor group and Ofwat declined to comment.
