Thames Water talks over rescue plan ongoing as bill hikes drive revenues higher

Troubled supplier Thames Water has said it remains locked in talks over its proposed rescue deal with creditors as it revealed soaring revenues and customer complaints due to bill hikes.

The debt-laden group – Britain’s biggest water supplier with around 16 million customers – said discussions were “positive” but ongoing with Government and regulators to agree a deal to turn around the firm and repair its stricken finances.

Thames Water 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.

But Thames Water warned there was still a “material uncertainty” over whether the deal would be secured and therefore its ability to continue as a going concern.

It said: “Since the proposal was made, positive discussions are ongoing between the consortium, the regulators and Government, albeit there remain a number of items to be negotiated and agreed before a recapitalisation can proceed.”

The group is hoping to secure the deal to stave off temporary nationalisation after being left on the brink of collapse by nearly £20 billion of debt.

Its creditors – which include institutional investors such as Aberdeen, Elliott Management and Silverpoint Capital – is seen as the final realistic option on the table to avoid being placed into the Government’s special administration regime after a previous rescue deal with US private equity giant KKR collapsed in May.

Administrators have already been lined up to step in if needed.

Chris Weston, chief executive of Thames Water, said: “We continue to work closely with stakeholders to secure a market-led solution that we believe is in the best interests of our customers and the environment.

“This in turn will allow the transformation of Thames to continue, a programme that will take at least a decade to complete and will restore the infrastructure and operations of the company.”

Half-year results from the provider revealed underlying earnings surged to £1.2 billion for the six months to September 30, compared with £715.1 million a year ago.

Revenues rose by 42% thanks to the bill increases, which it said also helped fund £1.3 billion of capital invested to fix leaks, cut sewage spills and improve water quality.

It said it cut pollution spills by a fifth but also revealed customer complaints had soared by three-quarters to 55,158 in the half-year after it hiked bills by a hefty 31% in April.

The group swung to a £414 million pre-tax profit from losses of £149 million a year earlier.

Results showed its net debt swelled to £17.6 billion from £15.8 billion a year ago, with Mr Weston saying the focus was on recapitalising the business given its “weak” balance sheet.

Thames Water has enough cash to last until early next year.

Its creditors are the bondholders who now effectively own Thames Water after the High Court approved a financial restructuring earlier this year through a loan of up to £3 billion to ensure it can keep running until the summer of 2026.

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 also meanwhile been reported that Thames Water is deciding whether to go ahead with more than £2 million of so-called retention payments to senior executives.

Alistair Carmichael, chairman of the environment, food and rural affairs select committee, had written to Thames Water last week to know whether the money would be handed out.

The latest payouts are understood to total £2.46 million, and would be the second instalment after £2.46 million was handed out to 21 of its most senior managers earlier this year in what sparked controversy given the supplier’s financial and environmental performance woes.