A rival bidder has thrown a potential lifeline to the beleaguered Thames Water, promising a cash injection of at least £1 billion more than competing proposals currently on the table.
John Reynolds, the chief executive of the independent water retailer Castle Water, has publicly criticised the existing creditor-led restructuring plans, arguing they are insufficient to resolve the utility's severe financial and environmental problems.
A Deeper Financial Commitment
Reynolds told The Times that the negotiations to rebuild Thames Water's finances are "not heading anywhere" and risk creating a solution that "does not stick." He emphasised that a fundamental shift in spending is required.
"You cannot compromise on the pollution problem," Reynolds stated. "It has to be resolved and that means changing the way the company spends its money." He advocates for a policy of "zero tolerance" towards serious pollution incidents, demanding significant upfront investment.
This extra funding, he suggested, could be unlocked by creditors accepting a greater reduction—or 'haircut'—on their liabilities, combined with an additional equity investment.
The Scale of the Crisis
Thames Water, which supplies about 16 million people, has been teetering on the brink of collapse for years, crushed under a net debt of £17 billion accumulated since its privatisation.
Control of Britain's largest water company has effectively passed to its lenders, a group led by hedge funds including the US firms Elliott Investment Management and Silver Point Capital.
Their proposed turnaround strategy involves writing off billions in debt. However, a contentious aspect of their plan is that it may allow Thames Water to not fully comply with pollution regulations for up to 15 years.
Conflicting Narratives and Potential Outcomes
Reynolds, a former investment banker, claims that talks between creditors and the industry regulator, Ofwat, have stalled. He specifically targeted the ageing Mogden sewage works in west London as a facility requiring urgent attention under his plans.
However, a spokesperson for the creditor group, operating under the name London & Valley Water, strongly denied this characterisation. They stated, "It is simply not true that discussions have stalled," and reaffirmed their goal to gain regulatory approval for their plan by Christmas.
Their proposal promises to invest £20.5 billion over five years to "fix the foundations, upgrade the network and reduce pollution."
The alternative to a market-led solution is the special administration regime, which would see the government take temporary control to impose debt write-offs and find a new buyer—a scenario all parties are likely keen to avoid.
Castle Water, a smaller company backed by the billionaire Pears family and co-founded by Conservative party treasurer Graham Edwards, previously attempted to acquire Thames Water. Late last year, it reportedly offered to inject £4 billion for a majority stake.
A Thames Water spokesperson confirmed that discussions regarding a recapitalisation are continuing, with the aim of delivering a solution that works for customers and the environment.
