Sunday, December 03, 2023

UK
Thames Water could run out of money by April, auditor warns


James Fitzgerald
Sat, 2 December 2023 

Thames water

Thames Water’s parent company could run out of money by next April if its shareholders don’t inject more equity into the debt-laden utility, its auditors have warned.

The group’s auditors, PricewaterhouseCoopers (PWC), said there is “material uncertainty” about its future because there are no firm arrangements in place to refinance a £190m loan held by one of the company’s subsidiary businesses.

Thames Water is set to face scrutiny over its debt levels and financing structure when its results are published on Tuesday.

Parliament’s Environment, Food and Rural Affairs Committee said it’s considering calling the firm’s executives in to explain whether they misled MPs about the company’s financial situation when they gave evidence in the summer.

The panel’s chair, Conservative MP Robert Goodwill, said on Friday: “Recent revelations of Thames Water’s financial situation raise further concerns about the stability of the company’s finances.”

In June, the water company entered emergency talks with the water regulator Ofwat, ministers and government departments after the exit of its chief executive and concerns over its ability to continue operating without a multibillion cash injection.

At the time, regulators suggested the company could be facing a hole of £10bn in its finances.

The business also faces breaching an interest cover covenant on a separate £200m loan by the same date “under a severe but plausible downside scenario,” PWC said. The disclosure was made in the 2022-23 accounts of Kemble Water Holdings, the top company in Thames’ ownership structure.

Thames Water shareholders have pledged to support the company, with a commitment in writing to inject £750m of further equity into the group. But PWC said that “the letter is not legally binding and there are no other firm commitments to refinance the £190m loan”.

In October, Ofwat said the firm had ‘significant issues’ to address. A spokesman said: “Thames Water must address their operational shortcomings and strengthen their financial resilience.”

The regulator has indicated that shareholders will need to put another £2.5bn into the business between 2025 and 2030.

A Thames Water Utilities Limited spokesman said: “We are in a robust financial position and are extremely fortunate to have such supportive shareholders”.


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