Environment Secretary Emma Reynolds has written to regulator Ofwat raising concerns about a £10bn rescue deal for Thames Water, moving the UK's largest water company closer to temporary public ownership. The company, which serves about 16 million people across London and southern England, has been trying to stave off financial collapse for the last three years under billions of pounds of debts, while struggling to fix leaks, stop sewage spills and modernise outdated infrastructure.
Thames Water's main group of lenders – known as London & Valley Water – put forward a rescue plan that would inject billions in fresh investment and write down about half of the company's £20bn debt pile. In return, the lenders want leniency from future pollution fines. Without the deal, Thames Water is set to run out of cash within months and could face financial collapse.
“Environment Secretary objects to Thames Water's £10bn rescue plan, pushing the utility closer to temporary nationalisation.”
But on Tuesday, Reynolds said she was concerned that the offer "does not do enough to protect consumers or the environment". Her intervention raises the chances of Thames Water falling into a special administration regime (SAR), a form of temporary nationalisation where government-appointed managers keep the company running. Proponents of public ownership say it would give Thames Water a fresh start, allowing it to write off some debts and find a new long-term owner. In April, an unnamed investor wanting to buy Thames Water said it would prefer temporary nationalisation because it would make the purchase easier.
Thames Water has pushed back strongly against that prospect, instead favouring a "market-led solution". The lenders have previously argued that a SAR would not solve its problems and will only "restart the process of fixing Thames Water". If the company did collapse, they would likely lose much of the value of what they are owed. The government had previously favoured a commercial deal, but Reynolds said it "stands ready for all eventualities".
No matter who owns or runs Thames Water, customers will see no impact on their services – taps will still run and toilets will still flush. However, Thames has said it needs to increase its bills to fix ageing infrastructure, with the average annual bill set to rise sharply until 2030. London & Valley Water said its proposed deal would hold bills at that level rather than pushing them higher still. A spokesperson for the group claimed its proposal was "the fastest route to improve outcomes for customers and the environment". But Reynolds said she did not want a scenario where Thames Water customers had…