Moody’s has lowered its rating on Thames Water’s debt to ‘junk’ in response to Ofwat’s latest ruling against the company.
The credit ratings agency downgraded Thames Water’s debt to Ba1, one level into its junk categorisation, a report released on Wednesday revealed. The company’s credit outlook remains negative.
The Moody’s ‘junk’ label signals that the agency believes Thames Water is highly likely to default on its debt, making it even harder—and more expensive—for Thames Water to borrow money.
The development is yet another twist in the sorry tail of London’s water provider.
Just yesterday, Queensland Investment Corp, one of Thames Water’s major shareholders, marked down the value of its investment in Thames Water to zero, effectively judging the company to be worthless.
And on the same day, the Environment Agency rated the firm’s environmental record at two stars. The 2-star status was the joint lowest of any water firm and earned Thames a strict dressing down from the regulator’s chair, who branded its discharge track record “unacceptable”.
Moody’s said in a statement that its downgrade was largely the result of Ofwat’s decision to put Thames into the equivalent of special measures, but that it reflected “Thames Water’s results for the financial year ending 31 March [which indicated] its weakening liquidity position”.
In the results the water firm declared that without any additional credit lines or investment, the firm had just 11 months before its cash would run out.
Reacting to the decision by Moody’s Ratings, Thames Water said: “[Thames Water] alerted Ofwat to the possibility of potential credit rating downgrades in April 2024 and continues to work with Ofwat to maintain the ongoing financial resilience of the business.
“Management is engaging with investors and its creditors and remains committed to seeking new equity funding and exploring all options to extend its liquidity runway.”