The Thames Water financial crisis has pushed UK ministers to appoint insolvency advisers to prepare for all possible outcomes. The company supplies water to 16 million people but faces severe financial pressure.
Steve Reed, the environment secretary, approved the hiring of FTI Consulting to advise on placing Thames Water under a special administration regime (SAR).This step would help keep water flowing to customers if the company collapses. However, a court must approve the SAR.
The government has been trying to avoid this scenario due to fears of a costly £4 billion bill falling on taxpayers. Despite this, the Water (Special Measures) Act allows the government to recover these costs from future customer bills.
Earlier this year, Thames Water suffered a setback when its preferred buyer, KKR, withdrew from a rescue deal at the last minute. Currently, the company’s main creditors are negotiating with the regulator, Ofwat, to inject capital into the firm. Thames Water carries £17.7 billion in net debt and has regulatory gearing of 84.4%.
The company also seeks Ofwat’s agreement to cancel more than £1 billion in fines. These relate to failures to invest properly and prevent sewage spills. Chris Weston, Thames Water’s chief executive, told parliament the company cannot pay these fines and keep investing as required.
A company spokesperson stated their focus remains on a market-led solution to stabilize finances and regain investment-grade credit ratings. Meanwhile, the GMB union criticized privatisation, blaming it for the Thames Water financial crisis. They demand government intervention to protect customers, workers, and pensions.
Recently, Thames Water faced criticism for planning to award large bonuses to senior staff from a controversial £3 billion loan. The company is now banned from paying bonuses to its chief executive and chief financial officer. A government spokesperson reassured the public that officials are ready for all outcomes, including applying the special administration regime if needed.
FTI Consulting has been contacted for comment but has not responded yet. The Thames Water financial crisis highlights the urgent need for a durable solution to protect millions of customers and the broader public interest.
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