Thames Water shareholders to inject £1.5bn as part of overhaul

Thames Water shareholders have agreed to invest up to £1.5bn in the company as the UK’s biggest water utility seeks to reduce its debt-laden balance sheet and improve performance amid an outcry over sewage pollution.

The company’s owners — which include a host of private equity groups and sovereign wealth and pension funds — will provide an initial £500mn of new equity this financial year.

Thames Water is also working with investors on a plan to provide a further £1bn of equity, which would be used to improve the company’s dismal record on customer service, leaks and sewage pollution.

Chair Ian Marchant described the plan as “one of the largest commitments of new equity in the UK water sector”.

The company, which provides water and sewage services to about a quarter of the population in England, said the injection would go towards an £11.5bn business plan, which includes a £2bn increase on the £9.6bn agreed by the regulator Ofwat.

The cash call comes amid growing concerns over the financial health of the sector, which provides an essential public service, paid for through customers’ water bills but delivered by privatised monopolies.

In August, Southern Water received a £1bn emergency equity injection from the Australian infrastructure manager Macquarie in a rescue recapitalisation of an English water company that was unprecedented in the three decades of the privatised industry.

Jonson Cox, the outgoing chair of Ofwat, said the decision by Thames Water’s owners showed that its discussions with the company had been productive. “We welcome this injection of extra equity by investors as a signal of Thames Water’s intent to get their house in order.

“We have been working hard to get all water companies to ensure they have robust financial resilience so they have the stability needed to fulfil their current and long-term obligations and meet the expectations of their customers.”

Last year, Ofwat warned that it was concerned over the financial resilience of the sector after total net debt rose to £56.2bn at the end of March 2021, up 1.1 per cent on the prior year. Average gearing, the ratio of a company’s debt to equity, was 72.8 per cent.

Thames Water, which has a complicated ownership structure, has gearing of 90 per cent at the holding company level and 82 per cent at the operating company level, well above the regulator’s optimal 60 per cent threshold.

The company has been at the centre of an outcry over sewage pollution by water companies. In October, it accepted that a detailed three-year analysis showed that much of the sewage it discharged went unrecorded. The regulator has opened an inquiry into the issue.

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