Lenders to Britain's biggest water company are plotting a multi-billion pound legal battle if Andy Burnham, who becomes prime minister on Monday, moves to nationalise Thames Water. The consortium of 100 institutional investors, known as London & Valley Water (L&VW), holds £17bn of the company's £21bn debt and has warned it will demand full repayment if the government forces the firm into public ownership.
Burnham has previously called for "greater public control" of the water and energy sectors, and last month told the Guardian nationalisation was possible. A Burnham ally told The Sunday Times that a special administration regime (SAR) – a form of temporary public ownership – would cost the taxpayer £2bn to keep the company afloat, with the government gaining control in return. "If it is going to cost the taxpayer £2bn to keep the company afloat then the taxpayer needs to receive something in return; that means control," the ally said.
“Thames Water creditors prepare multi-billion pound legal challenge if new PM Andy Burnham nationalises the firm.”
L&VW had proposed a rescue deal writing off £9.4bn of Thames Water's near £20bn debt pile and injecting £3.35bn in cash, in exchange for leniency on future pollution fines. Environment Secretary Emma Reynolds rejected the proposal in June, saying she did not want a scenario where Thames Water customers had to "pick up the bill for the company's failures". A Department for Environment, Food and Rural Affairs spokesperson said the government was "prepared for any eventuality", adding: "Thames Water customers have been let down for far too long, with 15 years of under-performance, increasing serious pollution, and customers left to pick up the bill."
Mike McTighe, the corporate troubleshooter leading the governance overhaul proposed by the consortium, said L&VW was open to government involvement but not public ownership. "We are keen to meet new ministers as soon as possible to discuss how we can work together in the best interests of customers, including by enhancing public control of the company's operations," he said. The consortium has hired a top litigation firm to prepare its legal position, sources confirmed.
Labour's deputy leader Lucy Powell, asked on Sky News whether a Burnham government would nationalise Thames Water, replied: "Let's see." She added: "The government has powers to bring a distressed water company under special measures, and let's see if the government needs to, wants to use those powers." With the company warning it has enough cash only until the end of this year, the clock is ticking on a deal that could avert a costly courtroom showdown.