The owners of Thames Water will reportedly start urgent restructuring talks in the coming days as the embattled firm’s parent company Kemble risks entering insolvency within weeks unless lenders agree to a debt-for-equity deal.
Restructuring experts Alvarez & Marsal will discuss all options with creditors, including bank lenders and bondholders, the Financial Times reported.
The news comes as the government tries to avoid a temporary renationalisation of Thames Water after shareholders refused to stump up £500m of emergency funding last week due to the company being “uninvestable”.
The nine shareholders, which include the Canadian pension fund Omers and a subsidiary of Abu Dhabi’s sovereign wealth fund, said they had lost patience with regulator Ofwat after its initial assessments on the company’s 2025-2030 business plan.
Thames Water has asked Ofwat for permission to hike bills by 56 per cent in real terms by 2030, pay lower fines on issues like sewage dumping and award dividends.
The shareholders’ decision has triggered a political headache for Rishi Sunak’s government as it faces the costly prospect of having to temporarily nationalise the company to prevent it from collapsing.
The sprawling group that includes Thames Water and Kemble is struggling under a debt pile worth at least £18.3bn, which has become increasingly difficult to service amid higher interest rates.
A £190m loan is due to be paid back by the end of April, with bosses telling MPs in December that the company could not afford the repayment.
Thames Water is under further pressure to make drastic improvements to its ageing infrastructure as, according to the Environmental Agency, it was responsible for the biggest increase in the number of raw sewage discharges into Britain’s waterways last year.
Oftwat is also investigating Thames Water for paying a £37.5m dividend to shareholders. Under new powers, the regulator could be allowed to impose fines of up to 10 per cent of the company’s turnover.
Kemble and Thames Water declined to comment on news of the restructuring talks.
Thames Water chief executive Chris Weston said last week that the company was “a long way” from nationalisation.