Thames Water shareholders signal readiness to take £5bn hit

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Thames Water shareholders signalled their readiness to take an estimated £5bn loss on their investment on Thursday as they ruled out injecting new equity into the troubled group.

Amid deepening uncertainty about Thames Water’s future, people close to the shareholders said many were preparing to write off as much as all their £5bn investment in the UK’s biggest water company.

The move dealt a blow to the group’s hopes of finding a way through its financial impasse. Thames Water needs billions of pounds to maintain operations and overhaul ageing infrastructure.

Its nine shareholders, which include Chinese and Abu Dhabi sovereign wealth funds, and UK and Canadian pension funds, said on Thursday the water company was “uninvestable” as they backtracked on a commitment to provide £500mn of equity this month.

One person close to the discussions said the shareholders’ decision was all but final. “There’s very little chance that they will come back from this,” added a banker close to the talks.

The warnings came just hours after Thames Water insisted that it might still be able to persuade shareholders to put in more money if Ofwat, the industry regulator, agreed to more favourable conditions governing the company.

The shareholders have been in a stand-off with Ofwat over the criteria for injecting more funds. Investors have demanded scope to increase bills and loosen rules over paying dividends, despite public anger over sewage discharges and the service record of the privatised utility.

In the meantime, Thames Water’s ability to service its £18.3bn debt pile has been put under pressure by the regulator’s moves to limit dividend payments.

Its parent company Kemble is scheduled to repay a £190mn loan next month.

But Kemble told its lenders on Thursday that the investors’ decision to backtrack on providing £500mn in fresh equity would leave it unable to continue making interest payments and unlikely to roll over the loan.

Bonds at Kemble subsequently plunged to just 15 per cent of face value.

While Thames Water’s management has long insisted that Kemble’s travails should not have an impact on the regulated utility, the water company’s bonds also traded down.

Ofwat called for Thames Water to “pursue all options to seek further equity for the business to turn around the performance of the company”. But, adding that services to customers would be protected, it said: “We need to ensure that the sector attracts investment and is fair to bill payers.”

Solutions could involve a debt-for-equity swap that would wipe out Thames Water’s current shareholders, a slide into special administration that would see external administrators seek new investors, or a potential renationalisation of the business.

Two of Thames Water’s largest shareholders — the pension funds USS and Omers — have already taken significant writedowns on investments funded by retirees’ savings.

The union that represents the biggest group of members in the USS called on Thursday for the renationalisation of Thames Water.

“We remain concerned that there is significant financial risk for our members in the scheme continuing to push good money after bad investments,” said the University College Union, which represents tens of thousands of members in the USS.

The USS, Thames Water’s second-biggest shareholder, declined to comment.

Shareholders had previously pledged £500mn by the end of March and £3bn by 2030, which Thames Water said would put the company on “stable footing,” without taxpayer money.

That commitment relied on Ofwat agreeing to a 56 per cent increase in water bills over the next five years as well as leniency on regulatory fines.

Thames Water sought to reassure the public that discussions were continuing. Chris Weston, the utility’s chief executive, told Radio 4 that special administration was “a long way off” and could be avoided if shareholders agreed to provide funds. The company said it had £2.4bn of cash and access to other overdrafts, enough for it to continue operating until 2025.

The company added that it would pursue all options to secure new investment “from new or existing shareholders”.

Line chart of Thames Water Kemble Finance, 2026 bond price showing Thames Water parent company debt

UK chancellor Jeremy Hunt said the Treasury would “continue to monitor very carefully what’s happening at Thames Water”. He added: “Our understanding is that the company is still solvent, today’s news should not have an impact on services received by customers.”

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

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”.


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