Nationalisation of Thames Water is looking more likely after the Government expressed concerns that its only rescue package on the table is ‘not good enough’.
The utilities company has been fighting off financial collapse since 2023, struggling with a £20billion pound debt pile, heavy fines for sewage pollution and problems caused by its Victorian-era pipes and pumps.
Reports say Thames Water could run out of money later in 2026 if a rescue deal is not agreed.
The water company continues to claim that a market-led solution – ie, one that does not involve Government intervention – is ‘the best way’ to deliver ‘better outcomes for customers and the environment.’
A creditor-led rescue package has been under consideration since mid-March – proposed by London & Valley Water, a consortium of Thames Water’s senior creditors including Invesco, Elliott Investment Management and Silver Point Capital.
This group’s £10billion rescue proposal is the only offer on the table.
In exchange, they want the regulator, Ofwat, to allow them a period of time where Thames Water would not be fined as heavily for sewage leaks while the company upgrades its ageing infrastructure.
An alternative to this private-sector rescue would be putting Thames Water in a special administration regime (SAR), a form of temporary public ownership.
Temporary public ownership could create problems for the Government; Thames Water’s debt could be added to the already strained public sector balance sheet.
Moreover, if Thames Water’s lenders are forced to take large losses, some overseas investors might become less willing to invest in UK infrastructure projects in the future.
As such, the Government’s preference had previously been for a market-led solution.
However, on Tuesday, the Government levelled criticisms at the one rescue package on the table – and has said it is standing by for ‘any outcome’.
Environment minister Emma Reynolds said she was ‘not convinced the current proposal was good enough’.
She believes that in its current form, it would lead to reduced performance standards and delays to vital infrastructure improvements.
Ms Reynolds said: “Thames Water customers have been let down for far too long, with 15 years of underperformance, increasing serious pollution, and customers left to pick up the bill.
“I have written to Ofwat to outline my early views that I am not convinced the current proposal is good enough for consumers or the environment.
“We stand by for any outcome.”
It is Ofwat, rather than the Government, which will have the final say on whether to accept the proposal – though the Government’s stance could impact the decision.
The regulator is currently reviewing the proposal and the result is expected in the next few months.
Ms Reynolds has written to Ofwat to give her preliminary views.
A Thames Water spokesperson said: “It is positive that the Secretary of State has provided feedback to Ofwat in relation to the London & Valley Water plan.
“We will continue working with all parties to reach an agreement that supports long-term financial stability and delivers better outcomes for customers and the environment.
“We believe that a market-led solution is the best way to support that outcome and ensure the uninterrupted delivery of our biggest infrastructure upgrade in 150 years.”
