Thames Water nationalisation moves closer as government ‘objects to rescue deal’ | Thames Water
Britain’s environment secretary has objected to a £10bn rescue proposal for Thames Water because it would place an “undue burden” on consumers and push the troubled utilities firm closer to public ownership.
Emma Reynolds wrote to regulator Ofwat on Monday expressing concerns about Britain’s biggest water company’s plan as she worried customers would lose out.
Reynolds is also understood to be concerned that the deal would lead to lower performance standards and delays in vital infrastructure improvements.
Ofwat was close to a deal with lenders under which the struggling company would avoid any new fines for the sewer leak for four years and in return would receive a cash injection into the business from its creditors and take over the company.
Reynolds said on Tuesday: “Thames Water customers have been disappointed for too long with 15 years of poor performance, increasingly serious pollution and customers having to foot the bill.
“I have written to Ofwat to outline my initial views that I am not convinced the current proposal is good enough for consumers or the environment. We are prepared for any outcome.”
Reynolds fears the bailout will “unduly burden” consumers, according to the Times, which first reported his concerns.
Earlier this month, Andy Burnham said Thames Water should be nationalised, saying public ownership of water companies would “definitely be an option” under his potential leadership in the Labor Party.
Burnham, the Labor candidate in the Makerfield by-election, has previously called for “more public control” over companies and told the Guardian this could mean nationalisation. He is understood to have met with water campaigners, including former Undertones frontman Feargal Sharkey, who advocates nationalizing water.
The Thames serves approximately 16 million people in London and the south of England. Since the company was privatized under Margaret Thatcher, successive private equity firms that have owned it have saddled it with £17.6bn of debt and it is now on the verge of collapse.
The government must decide whether to place it under special administration, a form of temporary expropriation, or accept a deal offered by its creditors that would see it wipe out fines of up to £1bn for illegally polluting the environment. If the government approves the rescue deal, the company would be partly controlled by Elliott Investment Management, run by billionaire Trump donor and hedge funder Paul Singer.
Elliott is a leading creditor in a consortium called London + Valley Water, which includes Silver Point Capital, BlackRock and M&G. A consortium of hedge funds known as London & Valley Water wants to take over the Thames in a multibillion-pound restructuring.
Thames has been struggling to stave off financial collapse for more than two years. Bosses tried to sell the company last year but their preferred bidder KKR pulled out of the deal at the last minute.
The government was expected to back a takeover of Thames Water this summer as the utility is rapidly running out of cash and is said to face collapse within months if a deal is not struck.
The deal proposed by London & Valley Water would see Thames Water inject £3.35bn of new equity capital and up to £6.55bn of new debt.
But Thames Water is also said to have to pay around £750 million to its creditors, lawyers and advisers as part of the restructuring.
The supplier will reportedly be hit by a £160 million charge, as well as accrued interest of £285 million owed to creditors, including institutional investors such as US hedge funds Elliott Management and Silverpoint Capital.
Ofwat has been contacted for comment.
