image source, Getty Images
- Author, Nick Edser
- Role, Business reporter, BBC News
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Debt-laden Thames Water said it had enough cash to fund its operations until the end of May next year, but that efforts to raise new money were continuing.
Britain’s biggest water company, which faces questions about whether it can survive, said its debts rose to £15.2bn in the year to March.
Thames has also faced heavy criticism for its environmental record, with the company saying its sewage discharges more than doubled last year.
Later this week, water regulator Ofwat is due to publish its draft decision on how much water companies can charge their customers for the next five years.
There has been speculation that Thames, which serves 16 million customers in London and the Thames Valley region, may have to be taken over by the government if it runs out of money.
The company says it has £1.8 billion in funding, enough to see it through to May 2025.
Thames reported a rise in annual profits to £157.3m, but boss Chris Weston said the company was facing difficult times, with strengthening its financial position a “critical priority”.
Thames wants Ofwat to allow it to raise consumer bills by up to 44% between 2025 and 2030, pledging more money to invest in green measures.
On Thursday, the regulator will publish its initial decision on how much water companies can increase bills. After that, there will be several months of negotiations before a final decision is made in December.
Thames said it would hold talks with potential investors and lenders following Ofwat’s draft decision, but added it was not expected to close until after the regulator’s final decision.
An earlier plan submitted by the company was rejected by the regulator, leading to questions about the firm’s future as shareholders in Thames parent Kemble Water subsequently withdrew a proposed cash injection into the company.
In addition to its financial difficulties, Thames has also been constantly criticized for the number of sewage discharges and water leaks that affect its customers.
Mr Weston, who joined Thames in January, said the company’s performance in this area was “not where it should be or where we would like it to be”.
The number of sewage discharges last year rose to 16,990 from 8,015, which was caused by “prolonged heavy rainfall”.
A 40% increase in rainfall over the previous year also led to an increase in the number of pollution reports to 350 from 331.
However, Thames said it had reduced leaks by 7% to an all-time low.
“Water quality is so important”
Marlene Lawrence is the founder of the Teddington Bluetits swimming group in South West London.
She said the group was concerned about water pollution in the River Thames and was “swimming with awareness”.
“I’m checking [the water quality] daily,” she told BBC Breakfast.
The river is used by many different water groups, such as canoe clubs, which is why water quality is so important, he says.
“People send their kids to learn to row and canoe, and they won’t do it if they know the quality of the river is bad. That’s so important.”
Thames’ results showed it paid two dividends totaling £158.3m to two of its holding companies in March this year.
But the company’s chief financial officer, Alastair Cochran, said the payments were to top up payments to pension schemes, adding that they were “entirely in line with normal practice”.
In March this year, Mr Weston said it was “ultimately possible” the firm could be nationalised.
In the latest results, Thames said: “I continue to believe that a market-led solution that enhances financial resilience is in the best interests of all stakeholders.”
However, he added that this “depends on securing a final regulatory decision that is feasible, fundable and investable as well as accessible to our customers”.
Communities Minister Jim McMahon said on Tuesday there was “no nationalization program for the water industry”.
However, he added that “there is no provision in the law for the water company to stop providing water”.
“We have to be clear that there is always some unpredictability.
Mr McMahon added: “The days of shareholder interest being put above the national interest, frankly, cannot continue and so we have to look at that and Thames has to look at their own house and put it in order.”
If Thames does come under government control, there is speculation that it will be placed under Special Administrative Regime, which would see financial advisers run the company on behalf of the government.
A precedent was set in 2021 when the energy company Bulb went bankrupt and was placed under special administration.
Regardless of what happens to the Thames, water suppliers to its customers will carry on as usual.