Yahoo Finance Q&A: What’s happening at Thames Water?
Thames Water is seeking to push up customers’ bills by 44pc over the next five years under new business plans sent to regulators.
The troubled water company said the move would see typical bills rise from £433 a year to £627 by 2029-30, an average of around £50 a month.
Thames is the UK’s largest water supplier, with 16 million customers in London and the Thames Valley region.
It currently has debts of about £15.4bn and it has come under fierce criticism for water leaks and sewage spillages. The firm’s huge debts have led to speculation it could be taken over by the Government.
Regulator Ofwat had dismissed the company’s original plan to invest £18.7bn to fix leaks and sewage spills, with most of the cash coming from a proposed 40pc increase in customer bills.
Thames is now proposing to invest a further £1.1bn. It said it could potentially invest £1.9bn on top of this, but this would result in customer bills going up by 44pc. Ofwat now has until June to publish its draft view on the firm’s latest plans.
Chief executive Chris Weston said: “Our business plan focuses on our customers’ priorities.
“As part of the usual ongoing discussions relating to PR24, we’ve now updated it to deliver more projects that will benefit the environment. We will continue to discuss this with our regulators and stakeholders.”
What is happening at Thames Water?
The company is at risk of renationalisation after it failed to secure hundreds of millions of pounds in survival funding.
Shareholders last month refused to give the company a £500m lifeline, saying regulatory requirements made its business plan “uninvestable”.
The announcement has raised new fears the Government could step in to rescue the heavily indebted firm from collapse.
Why did shareholders withdraw the cash injection?
Britain’s biggest water company had been expecting the half a billion pound payment by March 31 but shareholders withheld it, saying the company’s business plan was “uninvestable”.
The investors were unwilling to pump more money into the business after regulator Ofwat rejected Thames Waters’ plans to increase bills substantially for its customers over the next five years. Unless new funding is secured, the water company could be placed into special administration by the Government.
How much debt is Thames Water in?
Thames Water is looking for emergency funding as it battles to service its £14bn debt pile. It has come under increasing financial strain as interest rates have soared.
As part of a turnaround plan, the utility company had been lobbying Ofwat to let it increase bills by 40pc over a decade, pay dividends and receive lower fines to avoid temporary nationalisation by the Government.
Water companies have faced widespread criticism for sewage dumping and leaks, with the regulator putting them under increasing pressure to increase investment and fix their ageing infrastructure.
Who owns the company?
Thames Water’s shareholders include the Universities Superannuation Scheme, China’s Sovereign Wealth Fund and Canadian pension fund Omers.
Thames Water announced last year that investors would inject £3.25bn into the business, with £750m expected this year.
What could a collapse mean for customers?
Thames Water provides water and sewage services to 16 million households – about a quarter of the UK population.
The Government has previously said it is ready to take over Thames Water in the event of a failure. A bailout would cost an estimated £5bn, much of which would likely be borne by the taxpayer.
Jeremy Hunt, the Chancellor, said the Treasury is monitoring the situation “very closely”. If this happened, the company would likely be placed into a special administration regime.
This scheme was previously used to rescue energy supplier Bulb in 2021 before it was later sold to Octopus Energy.
However some believe that Thames Water could be renationalised permanently. It was privatised in 1989 when Margaret Thatcher sold off the publicly-owned water and sewage industry.
Speaking last week, Labour leader Sir Keir Starmer appeared to rule out nationalisation if he becomes Prime Minister.
Asked about the future of water companies in general following a string of scandals, he told the Reading Chronicle: “I don’t think nationalisation is the answer but getting a grip of it is.”
Under government regulations, water companies must provide service to customers even if in special administration
Households’ water supplies will not be cut off, and they will be kept updated if there are any changes to their supplier.
Chris Weston, chief executive of Thames Water, said: “I’d like to reassure our customers that, despite this announcement, it is business as usual for Thames Water.
“Our 8,000 staff remain committed to working with our partners in the supply chain to provide our services for the benefit of our customers, communities and the environment.”
Mr Weston told the BBC Radio 4 Today programme that even if there is no new funding the company has enough money to cover its operating costs into the next year.
Could water bills increase?
Thames Water said on Friday that discussions with Ofwat “are ongoing”.
The regulator could decide to allow the utility firm to increase customers’ bills in order to avert a taxpayer bailout.
Bills are already set to rise next month by an average 12.4pc, taking the typical annual payment to £471.
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