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Thames Water bidders cautious over deal

Bidders are calling for Thames Water’s creditors to accept steep losses before rescuers provide new equity

Bidders for Thames Water remain cautious over a possible deal to take over the embattled firm, with some rescuers reportedly demanding a temporary nationalisation deal to cut its debts and replace bosses.

New investors have a deadline of 10 February to submit bids with at least four groups expected to make offers for the firm despite its problems continuing to spiral.

But bidders are now calling for Thames Water’s creditors to accept steep losses before rescuers provide any new equity.

Some of the potential buyers may want the company to enter a form of temporary nationalisation called a special administration regime (SAR) to reduce its debt pile and replace its current management, The Guardian reported, citing sources with detailed knowledge of two of the bids.

Placing Thames Water under a SAR would protect the firm as a key public interest and protect it from the insolvency of a regulated operating company.

At least one bid has already been made for the firm with the stipulation that it first enters SAR to ensure a “clean slate”, the source told the paper.

The utility, which is England’s biggest water company with about 16 million customers, is in an estimated £16bn of debt and needs £3.3bn over the next five years to keep running, with the money due to run out by late March.

Any deal needs court approval before it is completed with a hearing scheduled on 6 February.

The water company has long faced public criticism over its sewage spills into Britain’s rivers and seas, with hundreds of pollution incidents in 2024. It also continues to raise bills for its customers while paying high dividends and executive pay and bonuses.

A blueprint codenamed Project Timber has been drawn up in Whitehall, which could see the company effectively nationalised under the SAR contingency plan. The Government has also approached several possible administrators, according to reports.

A possible SAR may cause a further headache for Chancellor Rachel Reeves as she attempts to curb UK spending.

Thames’ creditors would shoulder most of the losses rather than the Treasury if the Government pursued restructuring with a government-appointed special administrator, it is understood. The measure, however, may still be seen as politically dangerous for the Government.

“It is implausible that the government would accept a scenario where creditors get badly burnt in a SAR,” an unamed creditor told The Guardian.

“These are the very same investors they will need to help fund their big infrastructure projects and the Treasury has to be careful not to spook the debt markets with a wrong move on Thames.”

What does SAR mean for bills?

Last month, regulator Ofwat allowed Thames Water to hike consumer bills by 35 per cent by 2030.

The average annual bill will rise to £588 by 2030, Ofwat said, £152 more than the current levels of £436 a year.

The regulator said the lion’s share of that increase, about £108 of the £152, will come in the 2025-2026 financial year.

The ruling falls well short of the 59 per cent increase Thames Water had said it needed in the run-up to the decision to help it deal with its growing debt issues, as the embattled water company tries to negotiate a bailout.

The decision by Ofwat not to approve the 59 per cent hike is thought to have left the company with too little cash to meet its operating expenses.

It is unclear if any potential sale or nationalisation will increase bills further, but further increases are not out of the question with the troubled firm also facing a fine of £18.2m from Ofwat for paying £158.3m in dividends to shareholders which it said was not justified.

Thames has until 18 February to appeal to the Competition and Markets Authority against the limit on its bill increases by Ofwat.

An Ofwat spokesperson told The i Paper: “Thames Water must continue to pursue all options to seek further equity to fund its turnaround plan for the benefit of customers and the environment. Safeguards are in place to ensure that services to customers are protected, regardless of issues faced by shareholders of Thames Water.”

A spokesperson for Defra added: “The company remains stable and the government is closely monitoring the situation.”

Thames Water declined to comment.



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