Crisis-hit Thames Water has warned planned cuts to its five-year business plan by Ofwat are “not tenable” and would prevent the “turnaround and recovery” of the company.
In a statement, chief executive Chris Weston said the firm’s business plan would be “neither financeable nor investible and therefore not deliverable” under the water regulator’s suggestions.
Debt-laden Thames Water, the UK’s largest water supplier, has been battling to stave off collapse in 2024 amid soaring complaints over its infrastructure and repeat sewage spills.
It has appealed to Ofwat to sign off on a business plan that would make it “investible” and involves hiking bills by 40 per cent and investing around £22bn before the end of the decade.
However, Ofwat rejected its proposals last month, suggesting average bills should rise by 23 per cent as part of its 2024 price review for the sector.
Thames Water told markets it had “listened carefully” to feedback from the regulator. But it warned the “scale” of the cuts proposed by Ofwat, a 25 per cent decrease in the company’s proposed expenditure, were “not tenable and renders our plan uninvestible.”
Thames Water has now proposed hiking average customer bills by as much as 59 per cent by 2030.
The supplier has proposed raising average yearly water bills to £666.50 per customer by 2030, a 52 per cent rise.
That could rise to £696, a 59 per cent increase, if it is given extra spending allowances by the regulator.
The average bill over the five year period from 2025 to 2030 would be £638 under the proposal. Average bills in 2023 to 2024 were £433.
Thames Water’s ‘ambitious’ plan to address concerns
It comes after separate warnings from the trade association Water UK that Ofwat’s plans to cap bills could create a “material risk” companies will not be able to raise enough cash to prevent sewage spills.
Weston said Thames Water was forecast to spend over £2.7bn more than “our allowances,” adding that “structural underfunding” had led to “significant asset health challenges alongside a substantial increase in the group’s leverage”.
He said the water giant’s “highly ambitious” business plan would address “concerns over our overall performance including on customer service and dealing with wastewater.”
It involves a considerable increase in infrastructure, with total expenditure of £20.7bn over five-years and a further £3bn through gated mechanisms.
Sir Adrian Montague, chairman of Thames Water, said: “Thames Water’s plan has the full backing of the board. It sets out a path to adapt the business for the future and improves its service in the face of climate change and population growth.
“Ofwat’s draft determination and our response to it is one stage in the process – there will be many subsequent stages. The company and its leadership team are absolutely focused on the ambitious outcomes it aims to deliver for customers and the environment, and the role we play in enabling growth across our economy.
“After decades of focusing on keeping bills low, now is the time for difficult choices. It’s the responsibility of the company, our regulators and the government to seek solutions in the best interests of customers and the environment.