The group of lenders which want to take control of Britain’s biggest water utility and keep it out of government ownership are to pledge to the industry regulator that they will not offload the company before the end of the decade.
Sky News has learnt that Thames Water‘s largest creditor group, which account for the bulk of the company’s £20bn debt pile, will promise to retain ownership until it is in a sufficiently healthy position to attain a stock market listing.
The commitment to retain ownership until around 2030 is noteworthy because that is the date when the next regulatory price-setting cycle – known as an Asset Management Plan – is due to come into effect.
The creditors’ pledge will form part of a package to be submitted to Ofwat by the Class A creditors as soon as this week.
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It is designed to dispel any suggestion that the group of lenders might seek to offload Thames Water midway through a turnaround plan aimed at putting the company back on a sustainable long-term footing.
The creditors will also commit to not paying a dividend to shareholders for the length of the transformation plan or its return to the stock market, according to an executive at one of the participating funds.
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Earlier this month, the London & Valley Water consortium – which includes Elliott Management and Apollo Global Management – set out proposals for a £20.5bn investment and turnaround plan.
Its focus on reducing pollution incidents and leaks – which have triggered hundreds of millions of pounds in fines for Thames Water and destroyed the company’s reputation – is aimed at persuading Ofwat and the government that the investors have a viable plan to run one of the country’s most important businesses.
Thames Water has more than 16 million customers, accounting for more than a quarter of Britain’s population.
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In a statement issued four weeks ago, the chair designate, Mike McTighe, said its investment pledge made it “one of the biggest infrastructure projects in the country”.
“Our core focus will be on improving performance for customers, maintaining the highest standards of drinking water, reducing pollution and overcoming the many other challenges Thames Water faces,” he said.
“This turnaround has the opportunity to transform essential services for 16 million customers, clean up our waterways and rebuild public trust.”
The creditors are trying to agree a private sector-led solution to the crisis at Thames Water weeks after Sky News revealed that the government had put insolvency practitioners on standby to oversee its collapse into a Special Administration Regime (SAR).
Steve Reed, the environment secretary prior to last month’s cabinet reshuffle, signed off the appointment of FTI Consulting to advise on contingency plans for the company to be placed into a SAR – meaning it would be temporarily nationalised.
Rachel Reeves, the chancellor, has since said privately that the Treasury’s preference is for a private sector rescue of Thames Water.
Under the consortium’s plans, Thames Water’s largest group of creditors would in aggregate inject and write off as much as £18bn across its capital structure.
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Thames Water’s existing shareholders, which include the Universities Superannuation Scheme and an Abu Dhabi sovereign wealth fund, wrote off the value of their investments in the company months ago.
The company faces a deadline in the coming weeks to appeal to the Competition and Markets Authority against Ofwat’s final determination on its next five-year spending plan.
Ofwat ruled earlier this year that Thames Water can spend £20.5bn during the period from 2026, with the company arguing that it requires a further sum of approximately £4bn.
Thames Water was fined a record £123m several months ago over sewage leaks and the payment of dividends, with Ofwat lambasting the company over its performance and governance.
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It has also been engulfed in a row over the legitimacy of bonuses paid to chief executive Chris Weston and other bosses, even as it attempts to secure its survival.
Under new laws, Thames Water is among half a dozen water companies which have been barred from paying bonuses this year because of their poor environmental records.
The creditor group was effectively left as the sole bidder for Thames Water after the private equity firm KKR withdrew from the process, citing political and reputational risks.
The Hong Kong-based investor CK Infrastructure Holdings (CKI), which already owns Northumbrian Water, has sought to re-engage in talks about a rescue deal but has gained little traction in doing so.
Thames Water’s fate is also being hammered out against the backdrop of leadership change at Ofwat, with Sky News revealing during the summer that David Black, its chief executive, was to step down following the publication of a government-commissioned review which recommended the regulator’s abolition.
He has been replaced by Chris Walters, another Ofwat executive, on an interim basis.
A spokesperson for the creditor group declined to comment on Tuesday.
