Business Express is an online portal that covers the latest developments in the world of business and finance. From startups and entrepreneurship to mergers and acquisitions, Business Express provides reporting on the stories that matter most to business leaders and decision-makers.The website publishes news, press releases, opinion and advertorials on various financial organizations, products and services which are commissioned from various Companies, Organizations, PR agencies, Bloggers etc. These commissioned articles are commercial in nature. This is not to be considered as financial advice and should be considered only for information purposes. It does not reflect the views or opinion of our website and is not to be considered an endorsement or a recommendation. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third-party websites, affiliate sales networks, and to our advertising partners websites. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish advertised or sponsored articles or links, you may consider all articles or links hosted on our site as a commercial article placement. We will not be responsible for any loss you may suffer as a result of any omission or inaccuracy on the website.

UK’s Thames Water in crisis after shareholders refuse to pay up


UK’s Thames Water in crisis after shareholders refuse to pay up

By Sarah Young

LONDON (Reuters) -Thames Water, Britain’s biggest water utility, said on Thursday its shareholders had refused to pay 500 million pounds ($631 million) promised to stabilise its finances, heightening concerns over its survival.

The company, which supplies a quarter of Britain’s population in London and its surroundings, said it had until late next year to secure more funding or risk nationalisation.

But a standoff between the company, its shareholders and the regulator over whether it can hike bills to fund investment in its crumbling network of pipes has left it in financial limbo.

Chief Executive Chris Weston said Thames Water was not about to collapse, but if it did not receive equity by later next year, then it could be forced into “special administration”.

“We are a long way from that point at the moment,” he told BBC Radio on Thursday. “I think it’s premature to go there at the moment.”

Stating that the company had 2.4 billion pounds of liquidity, he added: “We remain in a solid financial position.”

The company has become a poster child for the failures of privatisation in Britain, as the challenge of servicing its 15 billion pounds of debt, keeping customer bills at an acceptable level and investing to stop sewage spills has overwhelmed it.

Finance minister Jeremy Hunt said the government was monitoring the situation “very carefully”. Last year the government said it was ready for temporary state ownership given the precarious state of Thames’ finances.

BUSINESS AS USUAL

Thames said it was “business as usual” for the company’s 16 million customers.

Regulator Ofwat and Thames have been locked in discussions over how much the company will be able to charge customers.

The group, which wants to put up its bills by 40% over the next five years, said the regulator’s plan as it stood was “uninvestible”.

Weston, who did not give further details on the tensions between the parties, said Thames would “pursue all options to secure the required equity”.

He expects to receive Ofwat’s five-year determination on future bills, investment and returns in June.

Don't miss out on any breaking news or insightful opinions!
Subscribe to our free newsletter and stay updated on the go!


By submitting this form, you are consenting to receive marketing emails from: Global Banking & Finance Review. You can revoke your consent to receive emails at any time by using the SafeUnsubscribe® link, found at the bottom of every email.

“Our current shareholders will have the opportunity to look at it again and decide whether they want to invest, or indeed we can go to the market and see what other providers of equity are out there in the market,” he told reporters.

The rise in interest rates over the last two years has heaped pressure on heavily indebted Thames.

Weston said Ofwat, which wants to keep prices down for consumers but also oversee a sustainable water system, should recognise the need for investor returns.

“You have to ask yourself the question why would an equity holder who is taking all the risk take on a lower return than buying a bond in the market,” he said.

COMPLICATED STRUCTURE

Thames Water’s nine shareholders include Ontario Municipal Employees Retirement System, the UK’s Universities Superannuation Scheme, a unit of the Abu Dhabi Investment Authority and the China Investment Corporation.

They said in a statement that Ofwat had declined to provide the necessary regulatory support and they were therefore not in a position to provide further funding.

Under a complicated structure, Thames Water is owned by Kemble Water. The shareholders, who own both, said Kemble Water would not be able to repay a 190-million-pound facility due on April 30 and it would ask lenders for an extension.

Asked by reporters about what would happen to Thames Water if Kemble went bust, Thames Water said it was ring fenced, would owe “no residual obligations” to Kemble and could continue as a going concern supplying water to customers.

The shareholders had agreed to invest 750 million pounds last July, with 500 million pounds expected by the end of this month. Thames Water said at that time it would need further equity of around 2.5 billion pounds between 2025-2030.

Ofwat said safeguards were in place to keep Thames Water operating whatever its shareholder issues.

($1 = 0.7926 pounds)

(Reporting by Sarah Young; Editing by Kate Holton, Paul Sandle and Emelia Sithole-Matarise)

 

Recent Post: