Debt-laden Thames Water moved a step closer to nationalisation after the government objected to a £10 billion proposed rescue plan. Environment Secretary Emma Reynolds wrote to regulator Ofwat, warning that the deal proposed by Thames' lenders would place an "undue burden" on customers.
Government Intervention
Ofwat was reportedly close to accepting an offer from a consortium known as London & Valley Water. In exchange for writing off around half of Thames Water's nearly £20 billion debt, the backers want the supplier to escape pollution fines for the next four years.
Ms Reynolds stated: "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. I have written to Ofwat to outline my early views that I am not convinced the current proposal is good enough for consumers or the environment. We stand by for any outcome." While the letter does not amount to the government telling Ofwat what to do, the intervention could be pivotal.
Campaigners Call for Action
Campaigner and former Undertones frontman Feargal Sharkey urged the government to "seize control of Thames Water." He told the Mirror: "She must seize control of Thames Water. If the Secretary of State wanted to, she has the power to do so today with the stroke of a pen. It is time to act. Thames Water customers have been paying for their own exploitation."
Campaigners have long argued for Thames, the UK's biggest water company with 16 million customers, to be brought back into public ownership. This would likely occur through a special administration regime (SAR), a temporary measure until a private sector long-term solution is found. Administrators have already been lined up to step in if needed.
Peter Hammond, one of the heroes of Channel 4's 'Dirty Business' docu-drama about the water industry pollution scandal, said: "I am pleased to see that they are considering SAR. That is positive, but the slight concern is what would come after SAR. We need to remove the profit motive."
The Cost of Nationalisation
One major argument against bringing water companies back into public ownership has been the cost, estimated by the government at £100 billion. However, Mr Sharkey and other campaigners have dismissed this figure.
The letter from Ms Reynolds comes during a difficult week for Prime Minister Sir Keir Starmer, with Andy Burnham, the mayor of Greater Manchester, hoping to win the Makerfield by-election on Thursday, which could pave the way for a leadership challenge. Mr Burnham recently signalled his desire to bring in a 10-year plan to renationalise the water industry, stating that reform is needed to put the public interest first.
Details of the Proposed Deal
London & Valley Water's proposed deal would see it inject £3.35 billion of new equity into Thames Water and up to £6.55 billion in new debt. However, Thames Water would also have to pay nearly £750 million to its creditors, lawyers, and advisers as part of the restructuring. The supplier would reportedly be on the hook for £160 million in fees, plus £28 million in accrued interest owed to creditors, including institutional investors such as US hedge funds Elliott Management and Silverpoint Capital.
Cliff Roney, a GMB union activist, former water worker, and contributor to Channel 4's 'Dirty Business' docu-drama, said: "It was clear from the outset that this deal would do nothing for consumers or the environment, and it's a relief to see that the government recognises that. As the government forges ahead with bringing rail companies back under public control, we urgently need them to do the same for the water companies. Temporary nationalisation is not enough to end uncertainty for water workers, and it won't fix the deep-seated problems with Thames Water. Renationalisation is the only way to end this farce and protect consumers, water workers, and our precious waterways."
A total of 107 MPs, including 42 Labour MPs, have signed an open letter to Ofwat and Ms Reynolds, calling on them to reject the latest deal put forward by Thames Water's creditors and bring the utility into special administration.
A Thames Water spokesperson said: "We remain of the view that a market-led solution is the best way to secure the long-term stability needed to continue improving performance and advancing our turnaround plan, for the benefit of customers, the environment, and our stakeholders. We are delivering our biggest infrastructure upgrade in 150 years, and our priorities remain on providing safe, resilient services for customers, supporting our colleagues, and working closely with suppliers, government, and regulators."
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