The government has thrown a £10bn rescue deal for Thames Water into doubt after environment secretary Emma Reynolds objected to the proposal, warning it would push costs onto customers and delay vital improvements.
Reynolds wrote to Ofwat chair Iain Coucher on Monday to raise concerns over the plan backed by the company's creditors, a consortium called London & Valley Water (L&VW). The deal would have seen lenders write off £9.4bn of Thames Water's nearly £20bn debt pile and inject billions of new cash, but in return demanded leniency from future pollution fines.
“Environment secretary Emma Reynolds has objected to Thames Water's £10bn rescue deal, pushing the troubled utility closer to temporary nationalisation.”
Speaking in the House of Commons, Reynolds said she had 'three particular concerns about the proposal: the unfair cost to customers, delays to vital infrastructure investments, and delays to environmental improvements'. She added: 'I do not believe that the current proposal goes far enough to protect customers and the environment.'
Thames Water, which serves 16 million customers across London and the south of England, has faced heavy criticism over its performance, sewage discharges and pipe leaks. In May last year, it was handed a record £122.7m fine by Ofwat for breaching rules on sewage spills and shareholder payouts.
The company's financial troubles first emerged three years ago. Since privatisation under Margaret Thatcher, successive owners have loaded it with debt, leaving it near collapse.
If Thames Water goes into a special administration regime – a form of temporary nationalisation – households would still receive drinking water and sewerage services.
L&VW defended its plan. A spokesperson said the group was 'confident that our plan is by far the fastest route to improve outcomes for customers and the environment, without any government funding or any cost to taxpayers'.
But Reynolds said she did not want customers to 'pick up the bill for the company's failures'. The government, she added, 'stands ready for all eventualities', including temporary nationalisation.
The objections have drawn support. On Tuesday, 107 MPs, including 42 Labour members, signed an open letter to Ofwat and Reynolds calling for the deal to be rejected and for Thames to be placed under special administration. Andy Burnham, the Labour mayor, said Thames Water should be nationalised, arguing public ownership 'would absolutely be an option'.
However, Conservative shadow environment secretary Victoria Atkins warned the government not to scare off potential investors.
Ofwat said it was reviewing Reynolds' letter and the rescue consortium's plans 'to assess whether they deliver a turnaround in the company's operational performance and strengthen its financial resilience'.