Eliminating all pollution incidents in the Thames Water network will be “almost impossible” and a public debate is needed about the real cost of ending all sewage outflows, chief executive Chris Weston has said.
Speaking as the company’s interim results revealed pollution incidents were up 40%, Mr Weston said “rising expectations” from customers about water quality and pollution were unlikely to be fully addressed in the next five years.
Thames faces a crucial 10 days in which it hopes to receive court approval for the first step in securing a £3bn loan to keep the company afloat, and two days later will discover by how much regulator Ofwat will let it increase customer bills.
That decision will determine what return potential new investors can expect, and how much creditors holding almost £16bn of the company’s debt will be prepared to lose in a restructuring.
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Mr Weston is confident the first step, a High Court hearing over a £3bn bridging loan, will pass.
As for Ofwat, he told a media call it was crucial the regulator allowed a rate of return to investors that reflected “the risk that investors will take in respect of the sector as a whole, and the company”.
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“Without this, neither Thames Water or the sector will attract the investment the companies need,” Mr Weston said.
Increasing returns to investors funded by bills rising as much as 50% will not be popular. Mr Weston’s message on pollution will be hard to stomach too, but it reflects the reality of underinvestment in an ageing system that’s increasingly overwhelmed.
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Public anger about sewage outflows – where effluent is deliberately discharged from overflowing sewers into rivers as a failsafe to avoid it backing up into homes – has increased both political pressure and the cost of borrowing for water companies.
Whatever Ofwat allows, Mr Weston said even the £23.7bn he wants to invest will not clean up the system entirely.
“It is important to remember the system is working as it was designed to,” he said of outflows, which were built in as a failsafe to the Victorian network.
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The Thames Tideway, a 25km tunnel beneath the river in London will open next year, diverting much of the sewage that ends up in the Thames from Acton to Beckton, but even that will not eliminate incidents.
“Some are very very minor, some are serious, so there has to be a priority to how we address this, there has to be a debate about the costs of meeting these pollution incidents,” he said.
“It’s not going to eliminate all pollutions, to do that will be almost impossible. So we need to have a debate about the cost.”
If financial engineering will determine whether Thames Water survives in its current form, the physical engineering of the ageing sewage system is another matter.
