Starmer must intervene over Thames Water crisis, say creditors

Telegraph

9 hours ago

Sir Keir Starmer is facing pressure to intervene in efforts to save Thames Water amid concerns that rescue talks could stall and leave Britain's biggest utility facing collapse.
Investors spearheading a bid for the stricken company say Ofwat's unwillingness to compromise on the issue of future fines threatens to scupper Thames's efforts to avoid special administration.
As fears over a breakdown in discussions escalate, the Prime Minister is being urged to step in and compel the watchdog to soften its stance on financial penalties.
'We have had a year of dealing with one of the most intractable regulators I've ever had the misfortune of coming across,' an investor involved in the rescue talks said.
'They have failed in their job. Absolutely, we need intervention from Downing Street.'
Another figure close to the planned deal added: 'I think what it takes is the Government and the regulator coming together – it needs the Environment Department, the Treasury, and even No 10 to say, 'what's the least worst outcome here?''
Growing criticism of Ofwat comes just days after the company's largest creditors tabled a proposal that would provide Thames with desperately needed fresh capital and repair its broken balance sheet.
However, in return for a proposed £3bn cash injection and more than £2bn of new loans, the consortium of more than 100 creditors is demanding immunity from billions of pounds in future fines – a request the watchdog is reluctant to grant.
Creditors have calculated that Thames could be on the hook for more than £1bn in further pollution and environmental failing penalties, The Telegraph understands.
In an attempt to persuade Ofwat to soften its stance, creditors are already preparing a second, sweetened bid that could see the consortium willing to offer more cash and write off a larger slug of debt.
One FTSE 100 infrastructure fund warned that Ofwat's intransigence could weigh on Labour's attempts to drum up appetite among foreign investors for UK assets.
'There is £500bn of investment that's needed across UK infrastructure that is contingent on stable regulation,' an investor at the fund said.
A source close to Thames's creditors said: 'Ofwat is undermining the Government's aim to attract private capital and deliver growth and reform across the water sector.'
With the rescue talks at risk of being derailed, Hong Kong's richest man, Li Ka-shing, is demanding to rejoin the auction for Thames. It comes after KKR, the preferred bidder, abandoned its pursuit of the business earlier this month.
Mr Li's CK Infrastructure (CKI) Holdings wrote to Sir Adrian Montague, the chairman of Thames Water, urging him to readmit them to the process.
However, any such move is expected to be fiercely resisted by creditors who question whether CKI's ties to China will trigger a lengthy investigation under the National Security and Investment Act.
It is understood they have already raised such concerns with Ofwat, while also warning about the amount of time needed for CKI to undertake due diligence.
A source close to the creditors expressed surprise that ministers were yet to get involved: 'They've got a regulator that continues to care more about showing they can punish this company and throw billions in fines at an insolvent business. That is not going to improve performance for customers.'
'Not been supportive'
Another pointed the finger directly at David Black, the Ofwat chief executive. 'It's well known Black has not been that supportive of some of these initiatives,' the source said.
A spokesman for the creditors added: 'These investors have the funding and experience required to deliver a transformation which is intended to mark a departure from past failings, creating a 'new' Thames Water that works effectively alongside government, regulators, and customers to deliver for the environment and economic growth.'
The institutions behind the plan include Assured Guaranty, Aberdeen Investments, Apollo, Attestor Asset Management, Royal Bank of Canada, Elliott, Prudential, Pimco, Invesco, Silver Point Capital, and Voya Financial.
An Ofwat spokesman said: ''Our focus is on ensuring that the company [Thames] takes the right steps to deliver a turnaround in its operational performance and strengthen its financial resilience to the benefit of customers.'
Ofwat is 'assessing whether the plans are realistic, deliverable and will bring substantial benefits for customers and the environment,'' they added.