Thames Water has swung to a profit after hiking bills by 40% — but the company’s debt is swelling and its cash is running out, presenting incoming prime minister Andy Burnham with an immediate test of his pledge to bring utilities under “public control.”
The troubled utility reported a post-tax profit of £113m for the 12 months to the end of March, a dramatic recovery from the £1.51bn loss it posted the previous year. But the improvement masks a deepening crisis: net debt has climbed to £18.5bn from £16.8bn, and the company warned it has enough cash to last only until the end of this year.
“Thames Water posts £113m profit but cash runs out by year end, testing Burnham's nationalisation pledge.”
“The money customers are paying in bills is nowhere near enough to fund the massive infrastructure upgrades needed after years of underinvestment,” the company said, adding that it has sufficient debt funding only until the end of 2026.
Two stark options lie ahead. The first is a rescue deal from lenders, which would involve writing off some debt and injecting new cash in return for softer environmental targets. Environment Secretary Emma Reynolds rejected that plan as “weak,” arguing it offers insufficient protection for consumers and the environment.
The second is a form of administration, with government-appointed officials running the company on the public’s behalf. That would leave the taxpayer on the hook for Thames Water’s existing debts and require billions of pounds of public investment. The so-called “special administration” is designed to be temporary, with the government recouping money if the business is sold to a private buyer.
Burnham, set to become prime minister on Monday, has previously called for Thames Water to be nationalised. But if he takes that route, he will face uncomfortable questions: how temporary would state ownership be, and how much would it cost? Getting taxpayers in the north west to subsidise a London water company might be a hard sell for the former Manchester mayor.
Greater public control could mean tougher regulation or capping how much Thames Water can borrow — but that would arguably make it harder for the firm to raise the money needed for repairs, the company has warned.
Thames Water chief executive Chris Weston told Reuters on Wednesday that its lenders “want to see what the new Burnham government” will do. There is no easy answer, but how Burnham responds to this fast-approaching problem will offer a first glimpse at what Burnhamism will look like.