A government minister has said that consumers will not be hit with higher bills if the Government takes Thames Water into temporary public ownership to tackle its rising debt.
Health minister Neil O’Brien insisted contingency plans are in place to ensure people continue to have access to water and that bills will stay the same if the government steps in to bail out the debt-laden company.
Thames Water “is still in the process of finding further resources from their shareholders, and that’s the first place they should look to, obviously,” he said.
“Of course, the Government does have contingency plans if this does become a problem.
“Absolutely nothing will happen in terms of either their bills or their access to water. We have contingency plans – like in these network utilities – to manage difficult situations.”
What’s happened with Thames Water?
On Wednesday, it was reported the Government has been drawing up emergency plans that could see the company be nationalised for a short time as it attempts to pay down its £14bn debt pile.
Thames Water has said it is working “constructively” to secure additional funding after receiving £500m from shareholders in March.
Ministerial Confirmation of Billing Stability Amidst Collapse Concerns
“Thames Water received the expected £500m of new funding from its shareholders in March 2023 and is continuing to work constructively with its shareholders about the further equity funding required to support Thames Water’s turnaround and investment plans,” the company said.
“Ofwat is being kept fully informed on the progress of the company’s turnaround and engagement with shareholders.”
The Government must ensure that Thames Water “survives,” Kemi Badenoch has said, as ministers consider whether to nationalise the utility company.
The Business Secretary said she is “very concerned” about the future of Thames Water, which is grappling with a £14bn debt pile.
Ministers are discussing the possibility of temporarily bringing the utility company back into public hands under a so-called special administration regime (SAR), used only once before the collapse of Bulb during the energy crisis.
Thames Water Bills to Remain Steady Despite Collapse Worries
It follows Tuesday’s sudden resignation of the company’s chief executive Sarah Bentley.
Ms Badenoch told broadcasters: “I’m very concerned. This is a commercially sensitive situation, and I know my colleagues across the Government are looking at what we can do.”
She added: “We need to ensure that Thames Water as an entity survives.”
Thames Water’s bonds have plunged in value today as the City increased bets that lenders will not be repaid.
Thames Water is struggling with a £14 billion debt pile and rising interest rates – and needs to raise money to service it. The company said it was “continuing to work constructively” with its shareholders to help raise the £1 billion of fresh equity it needs.
Thames Water is owned by a consortium of institutional investors, including a Canadian pension fund. Around £1 billion of its debt will be repaid by the end of 2024, on top of other loans.
In a sign of the pressure the company is under, chief executive Sarah Bentley stepped down with immediate effect on Tuesday after two years of trying to revive its fortunes.
Ministerial Assurance of Billing Stability Despite Company’s Troubles
The Government has held talks with the regulator Ofwat about the situation. At the same time, water minister Rebecca Pow said it would act to ensure water keeps flowing regardless of the company’s financial situation. She told MPs it was not her place to comment on a company’s financial position but said water firms were “considered resilient”.
Sky News reported earlier that, under contingency plans being drawn up, Thames Water could be placed into a “special administration regime”, effectively state ownership.
That happened in 2021 in the energy supply sector, which like water, is also a privatised regulated industry when the Government rescued energy supplier Bulb after it collapsed in a deal that cost taxpayers hundreds of millions of pounds.
Ofwat said it had been in ongoing talks with Thames Water about needing a credible plan to turn the business around. The industry was privatised by Margaret Thatcher’s Conservatives in 1989. Most water systems are in the public sector, including Scotland and Northern Ireland.
The idea was the private sector was better placed to improve drinking water and keep rivers and beaches clean than the Government, which would always prioritise areas such as schools and the NHS.
