Castle Water vows to create 2,000 jobs at Thames Water in fresh bid approach

Castle Water has vowed to create up to 2,000 jobs at Thames Water if it gains control of the struggling supplier, as part of a fresh approach that also offers an extra £1 billion cash injection above current proposals.

The utility firm has returned with an improved proposal for Thames, which is in advanced talks with creditors and regulators to secure funding that would stave off nationalisation.

Castle Water was one of the companies that had approached Thames about a possible deal earlier this year.

Its initial bid was rejected in favour of proposals by investment group KKR, which later pulled out of the bidding.

Thames is currently in talks with a consortium of its main creditors, named London & Valley Water, which has submitted plans to pump investment into the utility and write off debts in return for more lenient performance targets.

Meanwhile, Castle Water says its alternative plans would offer a cash injection of at least £1 billion above the current proposals, backed by the property group of the billionaire Pears family.

If a bid were successful, it would also create up to 2,000 jobs as part of a 25% increase in spending, including engineers, scientists and operational staff, the PA news agency understands.

The sweetened offering also includes commitments to repair and expand capacity in waste treatment plants to reduce pollution.

Castle Water is co-owned by Conservative Party treasurer Graham Edwards and says it is the largest independent water retailer in the UK.

Its chief John Reynolds said in an interview with The Times that he was “confident” the turnaround plan would solve pollution problems at Thames.

He also said he believes discussions between Thames and its creditors and investors had stalled due to the nature of its proposals.

However, a spokesman for the creditors said it was “simply not true that discussions have stalled”.

“Thames Water needs £5 billion of urgent funding from committed and experienced new investors to deliver improved outcomes for its customers and employees,” London & Valley Water said.

“We are working hard to secure a solution as quickly as possible.”

It is understood that discussions had slowed in the lead-up to the autumn Budget on November 26, after which talks with the Treasury over the proposals are expected to accelerate.

The consortium is hoping to finalise a rescue deal before Christmas.

It has vowed to write off around £4 billion, or 25% of the debt it holds in Thames, plus debt held by other creditors.

Including an extra £150 million of new equity, the lenders said they are pumping in a further £1 billion of investment, on top of the proposal submitted to regulator Ofwat in May.

However, the proposal comes with an effective ultimatum to Ofwat for it to accept renegotiated targets on pollution incidents and water leaks in return for the investment.

A spokesman for Thames said that discussions were ongoing.

“Discussions between TWUL’s (Thames Water Utilities Limited) senior creditors, the London and Valley Water Consortium, Ofwat, and other regulators in relation to a potential market-led solution to the recapitalisation of the company are continuing.

“TWUL remains focused on delivering a recapitalisation transaction which delivers for its customers and the environment as soon as practicable.”