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Ministers urged to publish bailout plan for Thames Water as debt crunch looms

thames  water
thames water

Ministers are being urged to lay out their contingency plans for Thames Water, as fears mount that the supplier’s potential collapse will cost taxpayers billions of pounds.

A group of MPs are pushing for the Department for Environment, Food and Rural Affairs to reveal details of “Project Timber”, the contingency plan drawn up by the Government in case of the utility giant’s failure.

Thames Water executives have valued its rescue package at £5bn in talks with the Government, it is understood.

Sarah Olney, the Liberal Democrat MP for Richmond Park who is leading the calls, said: “The public has a right to know what Ministers plan to do if this disastrous situation occurs.

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“This Conservative government’s refusal to make their contingency plan in the event of Thames Water’s collapse public is nothing short of a cover-up.”

Ms Olney is pursuing a motion for a debate on the issue in the House of Commons. It comes as fears grow over a looming repayment of a £190m loan in April, which Thames Water bosses have previously said they do not have enough money to meet.

Tim Whittaker, associate director at research institute EDHECinfra, which has covered Thames extensively, said: “If this can’t be refinanced or the shareholders don’t inject more money, then there’s a very real risk Thames Water’s parent Kemble could be put into administration.”

Problems stem from a long-running debt crisis at Thames, which serves 15m customers across London and the South-East.

Kemble, which was set up to raise finance for Thames, is solely reliant on dividends to service its debts.

However, Ofwat is currently investigating whether a recent £37.5m dividend has breached licencing rules, which could prompt a heavy fine for the supplier.

Troubles at the supplier have spooked debt markets, prompting a sell-off of bonds that has left prices at record lows.

The value of a bond linked to Kemble has plunged to 37p in the pound, down from 89p a year ago.

A bondholder who exited his position in Kemble earlier this year said any investors who haven’t sold out are “heading straight for the meatgrinder”.

An Ofwat spokesman said: “Ofwat does not comment on speculation.

“Thames Water needs to continue to deliver on its turnaround plan to improve its operational and environmental performance. It is for the company to secure shareholder backing to improve its financial resilience.

“We will continue to closely monitor the company’s progress as they do so to protect customers’ interests.”

Thames Water and Defra declined to comment.