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Home Banking Thames Water’s emergency life buoy deflates

Thames Water’s emergency life buoy deflates

by admin
Susannah Streeter
  • Thames Water is still on the hunt for a cash injection to keep business afloat.
  • The debt-laden company has around £1.8bn to fund our operations for the next 11 months to the end of May 2025.
  • Revenues rose 10% to £2.4bn due to “inflation linked” increases in the amount it charged for water and wastewater services.
  • Debt totals £15.2 billion up from £14 billion in the previous financial year.
  • London-listed water companies Pennon Group and United Utilities shrugged off Thames Water’s woes in early trade.

Susannah Streeter, head of money and markets, Hargreaves Lansdown:

‘’Thames Water is keeping afloat, but its emergency life buoy is deflating as efforts to raise funds from shareholders proves elusive. It can still tap funding of around £1.8 billion, until spring next year but it’s a reservoir that’s been shrinking. At the same time, its debt pile is an even bigger millstone and risks pulling the business under.

For now, the company is treading water, but it’s been in a more precarious position after shareholders at the parent company Kemble Water held off from injecting cash into the business over a row with the regulator Ofwat regarding how high bills could be put up by 2030 to enable it to pay for critical repairs.

Ofwat has been accused of standing by while the company’s owners enjoyed dividends, failed to invest in infrastructure and built up a huge debt pile. But it’s now shown more evidence that it’s flexing its muscles, and on Thursday will release a crucial report setting out how far it’s willing to enable customer bills to rise when it sets out the new five-year framework. Shareholders are likely to have been holding off for this clarification before deciding if they will inject more funding into the company or allow it to sink and be rescued by the government. The new Labour administration will want to avoid ‘nationalisation’ but will have to step in, given that it’s such a crucial part of the country’s infrastructure. It’s likely that emergency plans are being worked onto establish a publicly owned arm’s length body to run the company, if the financial plug ends up being pulled.

London-listed water companies Pennon Group, the owner of South West Water and United Utilities shrugged off Thames Water’s woes, rising in early trade. Pennon Group has invested much more money in improving and expanding its infrastructure over the last year. This put a strain on cash flows but it will be a net benefit in the longer run. The acquisition of SES Water has brought in more customers which should provide a further lift to revenues. The companies may still be sensitive to the draft pricing unveiled on Thursday but are in a significantly more resilient position than Thames Water.”

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