Thames Water will be made to appoint an independent monitor and develop a “suitable” turnaround plan as part of a raft of new measures from the regulator after the its credit rating was downgraded.
Ofwat said that the recent decisions from Moody’s and S&P – two of the world’s largest credit ratings agencies – to downgrade Thames Water’s debt to “junk” represented a breach of Thames Water’s licence to operate.
Consequently it has announced a raft of new measures the embattled firm must comply with, which as well as appointing a monitor to report on the company’s progress, and developing a new business plan, include taking the “steps required to deliver an equity raise”, and appointing new non-executive directors to the board.
Moody’s and S&P downgraded Thames Water’s debt to junk on July 24 and July 31 respectively, after the Ofwat placed the firm in special measures.
The decision meant the agency felt the water company was “highly likely” to default on its debt, making it harder – and more expensive – for Thames Water to borrow money.
David Black, the chief executive of Ofwat, said: “We are clear that Thames Water needs to remedy its licence breach, turnaround its operational performance and secure backing from investors to restore its loss of investment grade credit rating.
“These enforceable commitments will include our putting an independent Monitor into the business, to report back to us on what is happening to drive meaningful change in performance, and to ensure appropriate expertise is added to their Board.
“We will continue to monitor progress very closely and will not hesitate to take any further action if necessary.”
The decision from Ofwat comes just a day after it hit Thames Water – and two other water firms – with fines totally £168m, £104m of which was handed down to Thames Water.
Ofwat will carry out a consultation on the commitments ahead of a final decision, the deadline for responses to which is Friday August 16.