Ofwat’s search for an independent ‘monitor’ who will report on Thames Water’s progress and have access to company information is already under way, City A.M understands.
The new appointment is part of a string of new measures that Thames has signed up to in order to avoid a hefty fine for breaching its licence conditions, after Moody’s and S&P downgraded the water firm’s credit rating to “junk”.
Initially announced earlier this month, the measures, which on top of the new ‘monitor’ include developing and delivering a new turnaround plan, raising new equity and appointing a new non-executive director, were confirmed on Friday after a brief public consultation.
Thames Water provides water and sewage services to about 16m homes in London and its surroundings. It will permit the monitor to access its records and report regularly on the embattled water firm’s progress to Ofwat.
The regulator is responsible for appointing the monitor, and a source with knowledge of the process told City A.M. that its search for a candidate has already begun.
Ofwat hopes to appoint someone to the role – which there is no precedent for or previous example of – as soon as possible, it is understood.
Thames Water had its credit rating downgraded into the “junk” category earlier this summer by Moody’s and S&P, two of the world’s largest credit ratings agencies.
With Thames Water in desperate need of a new line of capital having warned in July that it only has the liquidity to fund 11 months of operations, the two agencies raised concerns about the water provider’s ability raise new capital and pay off its mountain of debt.
The latest measures from Ofwat instigated in response to the downgrades will remain in place until Thames is able to attract new investment and improve its credit rating, the regulator said.
As part of the undertakings to which Thames has committed, it will need to appoint for two new non-executive directors to its board and relevant board sub-committees.
The search for them is expected to take slightly longer, City A.M. understands.
When they are announced, the two directors will be responsible for “overseeing and the company’s compliance with the undertakings, and to liaise with [Ofwat] and the monitor”, the regulator has said.
A spokeswoman for Thames Water said: “We note that Ofwat has accepted the undertakings we have proposed.
“We remain focused on working with Ofwat to secure an investible PR24 determination [the five-year plan that Ofwat categorised as “inadequate”], which is key to attracting equity into the business.”