Get the free Morning Headlines email for news from our reporters across the world
Sign up to our free Morning Headlines email
Sign up to our free Morning Headlines email
Thames Water has been granted a bailout worth up to £3billion by a High Court judge, allowing it to stay afloat just weeks before it was set to run out of money and drawing fury from campaigners.
In a move branded a “national scandal” and a “disaster” for the struggling utility’s billpayers and the environment, the plans to restructure England’s biggest water company, which has around 16 million customers, were approved on Tuesday.
Thames Water Utilities Holdings Limited (TWUH), the parent company of Thames Water Group (TWG), needs £3.3 billion over the next five years to keep running as it faces roughly £16 billion of debt.
Earlier this month, Mr Justice Leech heard several days of arguments over whether to approve a restructuring plan, known as the “company plan”, which provides a loan of up to £3 billion with a 9.75 per cent interest rate, with a view to enabling operations until next year.
TWUH’s lawyers claimed the company would enter special administration (SAR) if the plan was not approved, but a smaller group of secondary creditors proposed an alternative plan known as the “B plan”, which the court heard would provide the company with the same funding but on better terms and should be adopted instead.
In a judgment on Tuesday, Mr Justice Leech ruled that the “relevant alternative” to the company plan being approved was SAR, and said: “After taking into account the public interest in ensuring the uninterrupted provision of vital public services, I nevertheless exercise my discretion to sanction the plan.”
The Liberal Democrats said the restructuring was “throwing good money after bad”, with MP for Witney Charlie Maynard announcing he would appeal the judgment after he gave evidence in court claiming the utility should be put into administration as customers will end up “paying the price”.
Matthew Topham, lead campaigner at campaign group We Own It, said in response: “The privatised company will limp on for a few more months like a profit-thirsty zombie. This crisis loan will keep Thames afloat in the short-term, but their underlying business model is rotten and should be condemned.
“It relies on piling up debt and raising customer bills so they can pay huge bonuses and dividends – all while pumping raw sewage into our waterways. The reason they’re getting bailed out is because they ran out of other people’s money to line their pockets with. It’s only a matter of time before they end up on the edge of bankruptcy again.
“This is the ‘doom loop’ of privatised water and there is only one way to break the cycle – public ownership.”
Thames Water said customers will not have to pay for the loan and their bills will be unaffected, with creditors set to bear the costs.
A hearing before the same judge, dealing with consequential matters arising from the judgment, is set to begin later on Tuesday.
Another hearing to consider whether the “B plan” can be put to creditors for approval could also be held on Wednesday.
Welcoming the ruling, Thames Water chief executive Chris Weston said: “This is good news for our customers, puts our business on a firmer financial footing, and enables us to continue to invest in our network and deliver critical infrastructure upgrades for our customers and the environment.”
Chairman Sir Adrian Montague added: “Critically, it enables the management team to continue progressing the turnaround.”
The High Court heard earlier in February that the restructuring was intended to be an interim measure to keep the company running before a substantive restructuring due later this year.
TWUH provides services through a direct subsidiary, Thames Water Utilities Limited (TWUL), which serves about 16 million customers – about 25 per cent of the UK’s population – and owns more than 20,000 miles of water mains and more than 68,000 miles of sewers across London, the Thames Valley and the Home Counties.
Tom Smith KC, for TWUH, told the court that letting it run out of money by not approving the company plan was “a risk which cannot be run”.
The company plan, drawn up by a cluster of investment giants including BlackRock, Abrdn and M&G, would effectively guarantee Thames Water can keep operating until 2026 by providing £1.5 billion of funding, with a further £1.5 billion potentially available.
It would also see payment dates for its debts extended by two years.
The court was told it had been approved by creditors holding more than 75 per cent of its Class A debt, which is worth about £11.5 billion and is the least risky class of bonds in its debt pile.
Branding the bailout “reckless”, a “national scandal” and a “disaster”, Charles Watson, chairman of River Action, said: “Customers will now bear the brunt of massive interest payments through higher water bills, paying for corporate failure while our rivers remain choked with sewage.”
He called on the government to “take back control of Thames Water and put an end to years of environmental destruction and financial mismanagement”.
A spokesperson for the environment department (Defra) said: “The company remains stable and the government is closely monitoring the situation.
“It would be inappropriate to comment further on the financial matters of a private company.”
A spokesman for Thames Water’s senior lenders – which includes finance firms Abrdn, Apollo Global Management, Elliott Investment Management, Invesco and M&G – said the deal will see the company’s debt pile reduced, give it more money to invest in its pipes and sewers, and give “vastly improved outcomes for customers and the environment”.
Source: independent.co.uk
