Thames Water shareholders refuse to inject £500mn of new funds

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Thames Water said its shareholders will no longer provide £500mn of fresh equity by the end of the month, intensifying fears over the future of the UK’s largest water company.

Shareholders, which include Chinese and Abu Dhabi sovereign wealth funds as well as UK and Canadian pension funds, fear that conditions imposed by industry regulator Ofwat had made the business “uninvestible”, Thames Water said following crisis talks on Wednesday night.

The £500mn was the first part of a commitment by shareholders last July to inject £750mn this year into Thames Water, which is saddled with an £18.3bn debt pile, faces fines over sewage discharges and needs billions of pounds to overhaul its ageing infrastructure.

Thames Water has been lobbying Ofwat to agree to steep increases in water bills as well as concessions on regulatory fines and an agreement that it can continue to pay dividends.

The unwillingness of shareholders to provide fresh funds raises the prospect that Thames Water, which supplies about a quarter of the UK’s population, could be temporarily nationalised under the government’s special administration regime. Shareholders had agreed to provide more than £3bn by 2030.

Chris Weston, chief executive, said on Thursday: “I’d like to reassure our customers that, despite this announcement, it is business as usual for Thames Water.”

The company said talks with Ofwat and other stakeholders were continuing and that it would pursue all options to secure new investment “from new or existing shareholders”.

Ofwat said on Thursday: “Safeguards are in place to ensure that services to customers are protected regardless of issues faced by shareholders of Thames Water.”

Thames Water has come under growing financial strains as higher interest rates add to the cost of servicing its debt. The utility is under pressure to upgrade its ageing infrastructure, faces fierce public criticism and regulatory fines over sewage discharges and is also wrestling with the challenges to its business from climate change.

The company said it still hoped to agree a business plan with Ofwat that was “affordable for customers, deliverable and financeable for Thames Water, as well as investible for equity investors”.

The company was plunged into turmoil last June when chief executive Sarah Bentley quit after a boardroom dispute over its turnaround plan. In December, Thames Water announced that Weston, a former head of British Gas, would be her permanent replacement.