Thames Water says it has secured a commitment for an additional £750m investment by shareholders, as the debt-laden company races to avoid the possibility of being placed in temporary public ownership.
The country’s largest supplier used the publication of delayed annual accounts, which showed a leap in financing costs, to announce further progress in its bid to raise cash to shore up its finances.
However, Thames admitted the new equity was dependent on investors agreeing a new business plan.
The amount also fell short of the £1.5bn sum that the water regulator had said Thames was seeking last week.
Sky News revealed last month how the government was drawing up contingency plans for the company’s collapse amid growing doubts about its ability to service a £14bn debt pile.
Thames Water, which argues it has strong liquidity, has been locked in efforts to shore up its finances over recent months by tapping shareholders for more cash.
It was understood on Saturday that a commitment to provide new equity had been secured from a number of investors, though the response to the plea for more cash was non-binding.
The request for fresh money, via an equity support letter, was believed to have been demanded by auditors as a condition of signing off the company’s accounts on a going concern basis.
They showed Thames spent £476.5m servicing its debts over the year to 31 March. It made an underlying loss after tax of £132.3m.
Thames is rushing to avoid the possibility of being placed into a special administration regime that would effectively take the company into temporary public ownership – as happened to energy provider Bulb in 2021.
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Amid criticism of past dividend flows, its financial position has been worsened by rising interest rates to which many debt repayments are linked, along with rising energy and chemical costs.
It is an industry-wide problem.
At the same time, firms are under pressure to bolster service performance following years of weak investment in infrastructure that has led to widespread anger over leaks and sewage dumps into rivers and the sea.
On Friday, Southern Water revealed it would not be paying dividends until at least 2025 following a further credit rating downgrade.
Thames, which paid no dividends in its last financial year, said it had met only 55% of its annual performance commitments.
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Interim co-chief executives, Cathryn Ross and Alastair Cochran, said the review of its turnaround plan was continuing.
“It was an extremely challenging year for Thames Water and the water industry”, they wrote.
“Our network came under unprecedented pressure from record temperatures, a drought and a freeze / thaw event. At the same time, economic factors also impacted our financial results with high inflation driven by a surge in energy and chemical prices.
“In short, our performance was not as we – or our customers – wanted it to be.
“Despite this, we are in a robust financial position. We had £4.4bn liquidity as at 31 March 2023 and are extremely fortunate to have such supportive shareholders.
“Their commitment to delivering Thames’ turnaround and life’s essential service is reflected in the largest equity support package ever seen in the UK water sector, whilst taking no dividends out.”
They added: “We’re fixing more leaks and customer complaints have continued to fall significantly. We have also increased investment in our networks and assets to record levels as we undertake a detailed review of our ageing Victorian asset infrastructure to determine what needs to be done to improve operational resilience and performance over the long-term.”
