Crisis-hit Thames Water has warned its cash is at risk of running dry by the end May next year due to a lack of new investment, forcing it to prepare a plan for its lenders.
The country’s biggest water company, which serves almost a quarter of the population, previously said it had £2.4bn of liquidity as of the end of March.
The company said on Tuesday that the sum had fallen to £1.8bn by the end of June.
Cash-strapped Thames Water has been struggling to secure fresh funds from existing shareholders after they withdrew promised investment of £500m amid a row with the industry regulator.
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Its annual results statement said of the struggle: “The board has concluded that although it is possible that equity will be received by 31 March 2025, this should no longer be assumed for financial covenant forecast calculation purposes.
“Consequently, the compliance certificate to be submitted to the Security Trustee in July 2024 shows non-compliance of certain forecast ratios for gearing and interest cover with Trigger Event thresholds.
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“This places restrictions on the Group’s ability to incur debt, pay dividends, and make payments to associated companies, and requires Thames Water to prepare a remedial plan for our lenders.”
The report from Thames Water, which has debts above £15bn, also showed the payment of two dividends worth £158.3m in March – raising the prospect of further penalties from Ofwat over rules governing rewards at poorly-performing suppliers.
Thames Water’s financial survival has been questioned since Sky’s City editor Mark Kleinman revealed in June last year that ministers had begun discussions on contingency plans for a possible special administration that would place the firm in temporary public ownership.
Such a move would allow everyday services to continue while its future is ironed out.
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Shareholders have refused additional funds, blaming regulator Ofwat’s framework.
The battleground is focused on industry-wide business plans for 2025-2030, which are currently under consideration.
Thames is seeking a hike of up to 44% to customer bills over the course of the next five years in return for almost £22bn of spending on improvements.
Ofwat, which is due to give its interim verdicts on company plans on Thursday, had already rejected pleas for a 40% hike to bills.
That determination prompted the withdrawal of promised investment, leaving Thames facing the prospect of having to secure new investors.
Its parent firm has already defaulted on debt interest payments.
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The company, which has long been accused of prioritising shareholder awards over infrastructure investment, has been trailing performance targets covering leaks and sewage discharges and at the mercy of fines over many years.
Sky News reported last month that Thames was facing the prospect of a £40m+ Ofwat penalty over a £37.5m payout to its owners last autumn.
The payment of the controversial dividend from Thames Water Utilities Limited, the operating business, to parent firm Kemble Water and its affiliates, is understood to have fallen foul of rules overseen by the regulator which aim to avoid rewarding shareholders during periods of poor performance.
The £158.3m sum revealed on Tuesday went to two of its struggling holding companies, Kemble Eurobond and Thames Water Limited.
