A consortium of Thames Water creditors has proposed a £20.5bn rescue plan that would see fewer infrastructure projects than previously agreed, as they seek to make the beleaguered utility viable. The group, called London & Valley Water, published a summary of its business plan on Wednesday, outlining a strategy that prioritises key activities but reduces the scope of improvements compared to the water regulator Ofwat's final determination.
People familiar with the proposal said Ofwat's plan was not deliverable and that the new plan offers better value for money. They argued it would make Thames viable and avoid temporary nationalisation of the UK's largest water company, which serves 16 million customers. The four-page summary mentions 'significant writeoffs by investors across the capital structure' but does not specify the extent of these writeoffs, stating it will 'fix the foundations of Thames Water and set a clear pathway to addressing current compliance gaps'.
The financial structure of the plan, including the haircut on debt, is being discussed with Ofwat this week. The proposal will then be submitted to credit ratings agencies to determine if it can restore Thames Water to investment grade, a requirement of its operating licence. Ofwat has deferred a referral by Thames to the Competition and Markets Authority until October, providing a window for negotiations.
Some Ofwat insiders view the plan as a partial rewrite of the final determination but consider it inevitable in pursuing a market-based solution. The amount of additional funding from the consortium beyond the £20.5bn from customers has not been disclosed. An Ofwat spokesperson said they would review the plan carefully to assess its impact on operational performance and financial resilience.
Mike McTighe, chair designate of London & Valley Water, said the focus would be on improving performance for customers, maintaining drinking water standards, and reducing pollution. A Thames Water spokesperson welcomed the consortium's commitment to addressing challenges without taxpayer funding.
