Thames Water in Talks with Stakeholders for Funding

Thames Water, the troubled British private utility company responsible for the water supply and waste water treatment serving 16 million customers in most of Greater London, on Friday said that the company is in discussions to extend its funding options to try to avoid a collapse of the company.

With a debt of $20.25 billion, half of it linked to inflation in post-pandemic era, Thames Water said that following the Price Review 2024 (PR24) draft determination and its response to Ofwat, the UK’s Water Services Regulation Authority, the company will be engaging with potential investors and creditors to seek new equity and to extend its liquidity runway.

Every five years Ofwat is required to set the price, investment and service package for water companies in England and Wales. The proposals announced in July are part of the PR24 and cover the period from 1 April 2025 to 31 March 2030.

As far as Thames Water is concerned, Ofwat has allowed the company $22.52 billion to invest on improving services for customers and the environment. Of this, around $4 billion funding is conditional on the company demonstrating it is ready and able to effectively deploy investment or that the investment will be effectively and efficiently targeted.

“This is in addition to the price review process that will see customers’ money clawed back if investment is not delivered,” Ofwat said.

Thames Water, the UK’s biggest water and sewage company, also said that they have been engaging with financial stakeholder groups and their advisors since July 2024 and are assisting with information requests to enable financial stakeholder groups to better understand the company’s business plan and future funding needs.

The company said that as at 31 August 2024, it had $2.09 billion of liquidity consisting of $1.53 in cash and cash equivalents ($510 million of which is currently required to be placed in reserves under our financing) and $560 million of Class A and Class B undrawn committed facilities.

“A further $730 million of undrawn reserve liquidity facilities are available to support Thames Water should we enter standstill under our financing. The combination of these resources provides a liquidity runway to May 2025,” the company said.

Contingency Plans

As part of contingency plans, the company has entered into discussions with its financial stakeholders to release cash reserves under the company’s financing, which requires majority creditor consent.

“If consent were not forthcoming and should it not be possible to draw the Class A and/or Class B facilities, available cash and cash equivalents would expire at the end of December 2024, whereupon we would enter standstill under our financing and the $730 million undrawn reserve liquidity facilities and $510 million of cash reserves would become available,” Thames Water said.