Thames Water has said it will run out of cash by next March if it fails to secure a £3bn financial lifeline, as it admitted its sewage spills had risen sharply.
Britain’s biggest water supplier said on Tuesday that all of its funds may be “exhausted” if it failed to secure the emergency funding from its creditors, putting it at risk of temporary nationalisation.
The heavily indebted company recorded a 40% increase in the number of pollution incidents in the six months to 30 September. Thames reported 359 category one to three pollution incidents in that period, blaming an especially wet spring and summer.
The industry has faced public outcry over sewage spills into seas and waterways. The Thames Water chief executive, Chris Weston, said that after “record rainfall and groundwater levels in our region, pollution and spills are unfortunately up”.
Thames faces two critical court dates, on 17 December and 20 January, in order to secure approval for the money – referred to as a “liquidity extension” – which some creditors have already agreed to lend.
Weston sought to justify staff receiving bonuses of £770,000 despite criticism from regulators, rising consumer bills and problems with environmental performance.
He said: “We need to attract talent to this company. We operate in a competitive market and if we don’t offer competitive packages people will not come and work at Thames and that will not solve the problem.”
Weston took on the job in January and was awarded a £195,000 bonus for his first three months at the company.
On Tuesday, Thames said net debts for its operating company had grown to £15.8bn during the half-year, from £14.7bn during the same period a year earlier. However, its overall debt is likely to be even greater – it has previously said its total debt was more than £19bn.
The financial update comes at a critical time for the company, which supplies 16 million customers across London and the Thames Valley and needs billions of pounds to maintain its water and waste treatment services.
If the court and its creditors approve, the proposed deal would give Thames enough funds to continue until October. Thames is also seeking to raise £3.25bn in new equity to fund investments up to 2030.
Thames said it had “sufficient cash to meet [its] liabilities as they fall due until prior to the end of March 2025 and any delays to the implementation of the liquidity extension transaction could result in that cash being exhausted”.
Giles Bristow, the chief executive of the pressure group Surfers Against Sewage, said: “Yet more excuses from Thames Water for yet another period of shocking sewage performance. What have their customers’ bills been going towards? This is a prime example of the urgent need for the government to radically reform England’s broken water sector.”
Tim Farron, the environment spokesperson for the Liberal Democrats, said“This latest shocking rise in sewage spills must be the final straw for Thames Water. The government must put this broken firm into special administration to give customers the fair deal they deserve.”
Weston and the chief financial officer, Alastair Cochran, said the efforts to turn around Thames Water’s financial position were bearing fruit.
Weston said: “Today’s news demonstrates further progress to put Thames Water on to a more stable financial footing as we seek a long-term solution to our financial resilience …
“We’ve reached key milestones in establishing a more stable financial platform, agreeing a liquidity extension transaction proposal and progressing our equity raise process.”
Investors have expressed interest in taking a new stake in the business, which is needed to secure its finances in the longer term. However, they are still trying to find out what terms they might win from the company, the government and the water regulator, Ofwat, if they provide billions of new equity funding.
Covalis Capital, a UK infrastructure investor, is reportedly interested in bidding for Thames, with advice from the French water contractor Suez. It has offered a £1bn upfront injection of cash with a further £4bn raised from breaking up and selling off parts of Thames before listing the remaining operation.
Other potential bidders include the Hong Kong-based company CK Infrastructure Holdings, which already owns Northumbrian Water and Castle Water.
Thames Water posted underlying first-half profits of £715m, up 14%.
Ofwat is due to announce on 19 December how much water companies in England and Wales, including Thames, can charge customers through bills over the next five years. Thames wants to increase bills by 52%.
