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Investors withdraw £500 million funding as Thames Water faces regulatory standoff

  • Investors withdraw £500 million funding as Thames Water faces regulatory standoff

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Investors backing Thames Water have retracted £500 million in emergency funding amidst a deadlock with industry regulator Ofwat over proposed bill hikes. This move could escalate the likelihood of the financially strained company to be nationalized.

On Thursday, Thames Water disclosed that its shareholders declined to release the initial £750 million tranche aimed at securing its short-term cashflow, after the utility had failed to meet certain conditions.

“The first £500 million of the new equity that had been anticipated will not be provided by Thames Water’s shareholders by 31 March 2024,” Thames Water said in a press statement.

In July, Thames Water had secured £750 million in funding, with the initial installment expected by March 31, contingent upon meeting certain conditions.

The UK’s largest water company went on to explain that discussions with Ofwat and other stakeholders are ongoing.

“Thames Water aims to secure a PR24 regulatory determination that is affordable for customers, deliverable and financeable for Thames Water, as well as investible for equity investors. Following receipt of the draft PR24 determination (expected in May/June 2024), Thames Water intends to pursue all options to secure the required equity investment from new or existing shareholders.”

Thames Water has, however, noted that it has “liquidity of £2.4 billion of cash and available committed facilities, as of 29 February 2024.”

Chris Weston, CEO of Thames Water, reiterated the company's commitment to serving its 15 million customers without disruption. “I’d like to reassure our customers that, despite this announcement, it is business as usual for Thames Water.”

Following the announcement made by Thames Water, Ofwat, which is scheduled to publicly assess Thames Water and its peers’ business plans in June, responded that safeguards are in place to guarantee uninterrupted services for customers despite challenges faced by Thames Water shareholders. With Thames Water now needing to explore all avenues for additional equity to improve company performance, the regulator emphasized the company's substantial regulatory capital value of £19 billion, £2.4 billion in liquidity, and an annual regulated revenue of £2 billion, alongside a newly appointed leadership team.

“We also need to see companies deliver the performance that customers expect and that they are run in a way that meets customers’ expectations,” said Ofwat.

Thames Water's crisis unfolds against the backdrop of alarming data revealing a significant surge in raw sewage discharges into rivers and seas this week. According to a new report published by The Environment Agency, data for 2023 shows a 54% increase in the number of sewage spills compared to 2022.

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