Thames Water has 'significant issues' but has funds - regulator

The government has held emergency talks in recent days over the fate of the heavily indebted company, with officials ready to place the company in temporary state ownership if it cannot secure new funds from shareholders. Seeking to ease fears of an imminent collapse, water regulator Ofwat said that while Thames Water needed to improve its financial resilience, it had 4.4 billion pounds ($5.6 billion) of cash and committed funding, which it called "strong liquidity".

Britain's water regulator sought to reassure the government on Thursday that the country's biggest supplier Thames Water was not on the brink of collapse, saying while it needed greater resilience it still had strong liquidity. The government has held emergency talks in recent days over the fate of the heavily indebted company, with officials ready to place the company in temporary state ownership if it cannot secure new funds from shareholders.

Seeking to ease fears of an imminent collapse, water regulator Ofwat said that while Thames Water needed to improve its financial resilience, it had 4.4 billion pounds ($5.6 billion) of cash and committed funding, which it called "strong liquidity". It said Thames Water's environmental and leakage record was "poor" and as well as strengthening its balance sheet it needed an operational turnaround.

The company, owned by Ontario Municipal Employees Retirement System, the UK's Universities Superannuation Scheme and China Investment Corp among others, hastily replaced its chief executive on Tuesday. Thames Water is struggling with a 14 billion pound debt pile, the servicing of which has become more onerous as payments on about half of it are linked to inflation, the rate of which has soared since late 2021.

The company has said it is trying to raise an additional 1 billion pounds from its shareholders to help fund the turnaround. UNDER PRESSURE

Britain privatised its water industry in 1989 and Ofwat is responsible for setting prices, ensuring environmental targets are met and monitoring the finances of the water companies in England and Wales, many of which are owned by infrastructure investors, pension and sovereign wealth funds. There are now growing concerns about the financial resilience of the sector after companies amassed vast debts since privatisation, when interest rates were far lower than they are now.

Ofwat said in December that as well as monitoring Thames Water's finances, it was also engaging with Southern Water, which is majority owned by Macquarie, Yorkshire Water, which is majority owned by the private equity arm of Singapore's GIC investment group, as well as SES Water and Portsmouth Water. In its statement on Thursday, Ofwat said it continued to scrutinise the financial resilience of all the country's water companies.

The sector has hit the headlines in recent years amid a public outcry over the release of sewage into rivers and seas, with critics accusing the operators of prioritising dividend payments over much-needed infrastructure upgrades. ($1 = 0.7909 pounds)