THAMES Water’s future looks increasingly uncertain as critical funding is being withheld after its business plan was dubbed “uninvestable.”
The water provider has been engaging in negotiations with regulator Ofwat to address the £18 billion debt as investors in the company proposed investment of around £3 billion over a number of years.
However feedback from the regulator has rendered Thames Water’s business plan “uninvestable” if implemented.
Negotiations are still ongoing in an effort to prevent the firm from collapsing, which could lead to nationalisation.
Shareholders have released a statement explaining that Thames Water’s plan would see the largest ever investment program by a UK water company, equal to the £18 billion of debt faced, and pledged to “take no cash out” of the business until further improvements were made to its finances.
They have now said that Ofwat has been unprepared to provide “necessary regulatory support” for the business plan, and that they will subsequently withhold the funding.
A spokesperson for Ofwat said that its feedback was designed to “safeguard” services to customers “regardless of issues faced by shareholders,” and that investment in the sector must be fair to customers.
They explained also that more than £4.5 billion has already been injected into the sector, with draft determinations by the regulator due to be set out in June.
It follows the announcement that shareholders were set to provide £750 million in funding, £500 million of which was due to be given by the end of March.
The funding was subject to a number of conditions, which shareholders say have not been satisfied.
A statement released on behalf of the shareholders explains: “Shareholders and Thames Water have been working with the regulator Ofwat for over a year on how to address the complex challenges facing the business.
“These include both meeting current funding demands and the urgent need for substantial investment to improve performance.
“These discussions led to the submission of a business plan which included the largest ever investment programme by any UK water company – over £18 billion – to improve customer service and environmental standards.”
It continues: “To support such unprecedented investment, shareholders committed to supporting a further £3.25 billion of investment on top of the £500 million provided last year, and pledged to take no cash out of the business until a turnaround was delivered.
“This was a solution which addresses the root cause of Thames Water’s challenges without the need for any taxpayer funding.
“However, after more than a year of negotiations with the regulator, Ofwat has not been prepared to provide the necessary regulatory support for a business plan which ultimately addresses the issues that Thames Water faces
They added: “As a result, shareholders are not in a position to provide further funding to Thames Water.”
“Shareholders will work constructively with Thames Water, Ofwat and Government on how to address the consequences of Ofwat’s decision.”
Chris Weston, CEO of Thames Water said: ‘I’d like to reassure our customers that, despite this announcement, it is business as usual for Thames Water.
“Our 8,000 staff remain committed to working with our partners in the supply chain to provide our services for the benefit of our customers, communities and the environment.”
