£750 million in funding secured by Thames Water

Thames Water shareholders have consented to provide an additional £750 million in funding as the company attempts to fend off government control. Thames also stated that it would seek an additional £2.5 billion between 2025 and 2030.

The water company has been criticized for sewage discharges and breaches, and it is buried in debt. The government has made clear that it is prepared to intervene should the company fail.

Last month, it was revealed that Thames Water was in talks to secure additional funding, and the company's chief executive Sarah Bentley resigned after just two years. In a special administration regime (SAR), the government could provisionally take over Thames until a new buyer is found if the company, which has approximately £14 billion in debt, is unable to secure fresh funding.

After enduring financial difficulties, the energy provider Bulb has recently taken this course of action. Cathryn Ross, the new interim co-chief executive officer of Thames, informed the sources that the company was "absolutely not" near to requiring government intervention. She stated that the company had access to cash and credit facilities worth £4.4 billion. 

However, the £750 million that investors have consented to invest in Thames between now and 2025 is less than the £1 billion that the company sought. The additional funds are contingent upon Thames's improvement of its business plan to revitalize the company.

Thames Water serves a quarter of the population of the United Kingdom and leaks more water than any other water utility in the country, losing the equivalent of 250 Olympic-sized swimming pools per day. Thames was fined £3.3 million last week for discharging millions of liters of raw effluent into two rivers in Sussex and Surrey in 2017, resulting in the death of over 1,400 fish.

The business is owned by a consortium of investors. The largest is the Canadian pension fund OMERS, followed by the pension fund for UK academics, Universities Superannuation Scheme. David Black, chief executive officer of Ofwat, testified before the Lords' business committee last week that Thames would require "substantial sums of money" to stabilize its finances.

Ms. Ross told the sources that Thames Water's current debt represents 77% of the business's value, which is the lowest level of debt for the company in a decade. However, Thames is the most severely indebted water company in England and Wales, and the interest payments on more than half of its debt increase in tandem with inflation, which has remained stubbornly high over the past few months.

Since 2005, Thames Water has not paid dividends to external shareholders, according to the company. However, Sir Robert Goodwill  suspected Thames' holding company of withdrawing funds as debt payments rather than dividends. Ms. Ross, however, stated that Thames' holding company was responsible for a negligible quantity of debt.

She mentioned that in the previous year, they paid £45 million to service the debt that was primarily provided by their shareholders via the holding company. Their revenues last year totaled £2.3 billion, so less than 2% of those revenues went toward servicing their debt. The overwhelming majority of our regulated company's debt is held by bondholders on the open market.