Latest news with #SpecialAdministrationRegime
Epoch Times
28-05-2025
- Business
- Epoch Times
Thames Water Fined £122.7 Million Amid Financial Crisis and Political Pressure
Thames Water has been hit with a record-breaking £122.7 million fine by the regulator Ofwat for sewage treatment failures and dividend payment breaches. The financial penalty—the largest ever imposed on a water company—comes as the debt-laden utility battles for survival amid calls for nationalisation and concerns over the ultimate cost of the company's financial distress to taxpayers. Ofwat's fine is split into two parts: £104.5 million for sewage treatment failures and £18.2 million for breaching rules on dividend payments. The investigation uncovered that Thames Water paid £37.5 million in interim dividend payments in October 2023 to its holding company, Thames Water Utilities Holdings Limited, and a further £131.3 million in March 2024. David Black, Ofwat's chief executive, called it a 'clear-cut case' in which the company 'has let down its customers and failed to protect the environment.' This marks the first time Ofwat has penalised a company over shareholder payouts. The decision puts Thames Water into 'cash lock up,' requiring it to obtain Ofwat's approval before paying out any further dividends. Related Stories 2/18/2025 4/16/2024 Environment Secretary Steve Reed said on social media platform X that the government has delivered on the promise to clean up Britain's waters, Earlier this year, Thames Water secured the On March 31, it announced that it had selected U.S. private equity firm Kohlberg Kravis Roberts & Co. (KKR) as its preferred bidder to acquire a majority stake in the company. In an update published on its website, Thames Water The deal, however, remains subject to due diligence, regulatory approvals, and final agreement on terms. With the added pressure of new Ofwat fines, the provider's recovery could be even more difficult. The penalties are likely to increase its borrowing costs and impact the company's ability to attract new investment. Special Administration Regime If Thames Water were to become insolvent or unable to provide essential services, it could be placed under the Special Administration Regime (SAR). SAR is a legal safety net used to keep vital utilities running when private companies fail. The regime was last triggered in 2021 when Bulb Energy collapsed during soaring wholesale energy prices. In such cases, the government steps in to fund operations, with the goal of recovering those costs later through restructuring or a sale. At the High Court hearing, Mr. Justice Leech said that if Thames Water's rescue plan wasn't approved, the next likely option would be for the company to enter the SAR. However, after considering the public need for uninterrupted water services, he decided to approve the company's rescue plan instead. Thames Water's Beddington Sewage Treatment Works, near Croydon, south London on March 14, 2025. Ben Stansall/AFP via Getty Images Thames Water Defends Record In response to the penalties, Thames Water said it takes its environmental responsibilities 'very seriously.' The firm added that it has already made progress in addressing issues related to storm overflows. 'The dividends were declared following a consideration of the company's legal and regulatory obligations. Our lenders continue to support our liquidity position and our equity raise process continues,' a Thames Water spokesperson said. Private Equity Bid Despite the company's optimism over KKR's £4 billion proposal, the prospect of a foreign private equity takeover has sparked debate in Westminster. In the House of Lords, Lord Prem Sikka has He pointed out that the company already holds 187 criminal convictions and urged the government to clarify what conditions it would impose on any new owner. 'We need to know precisely what the government will demand,' he told peers. In a separate parliamentary debate, Liberal Democrat MP Luke Taylor noted that more than a quarter of Thames Water customer water bill payments now go toward interest on its debt. 'That is our money paying for the company's mistakes,' he Taylor questioned the decision to allow a foreign private equity firm to take over such a critical public utility and called for sector-wide reform, suggesting the government should work in collaboration with Thames Water to ensure 'good governance.' Referring to KKR's track record with Northumbrian Water—which saw over 40,000 sewage spills in 2024—he asked, 'What will change if it takes over Thames Water?' Calls for Public Ownership Labour MP Bell Ribeiro-Addy rejected the idea of another private takeover altogether, advocating instead for renationalisation. She dismissed arguments in favour of competition as irrelevant in a monopolised sector. 'Which other water company can my constituents switch to when the service is poor?' she asked. As of 2025, What It Means for Customers Thames Water's financial problems and record fine raise big questions for the 16 million people who rely on its services. For now, water and sewage services will continue as normal, even if the company ends up in the SAR. While Ofwat has blocked Thames Water from paying dividends and is watching its finances closely, campaigners argue that these measures are not enough. The think tank Common Wealth 'We don't need the sticking plaster of reactive fines, we need proper surgery: to remove the profit motive from water,' it added.
Yahoo
16-03-2025
- Business
- Yahoo
Thames Water set for crucial court ruling
The fate of debt-laden Thames Water will become clearer as soon as tomorrow. The Court of Appeal is expected to decide whether the company's plan to borrow a further £3bn to avoid collapse can proceed or whether it upholds objections from a small group of creditors and Liberal Democrat MP Charlie Maynard. If it approves the plan, Thames Water lives on long enough to attempt a restructuring of debts and garnering of new investment. If it approves the appeal, the company is likely to fall into a government-backed administration within weeks or days. Either outcome is guaranteed to generate strong reaction. Customer bills and supply are unlikely to be affected - either way, bills are due to go up. The company – and the vast majority of lenders - insists that a government rescue will end up costing taxpayers billions, set back the timetable to fix this broken business and send both suppliers and would-be investors running for the hills. Others, including Mr Maynard and academics like Professor Sir Dieter Helm, argue that the Thames plan mainly serves the narrow interests of its current lenders who stand to lose more of their money in an administration than they would if they can keep the show on the road – particularly since the extra money they want to lend them comes with a very hefty interest rate. The public interest is best served, they say, by using the same mechanism employed when energy company Bulb went bust. In that case, the cost was initially estimated by the Treasury to be £6bn but ended up costing close to zero as energy prices moved in the government's favour. The answer depends largely – but not entirely – on how much one estimates a government rescue would cost taxpayers. Thames itself has presented an estimate of up to £4bn. While Charlie Maynard has presented a figure of £66m. Others have said it wouldn't cost taxpayers a dime in the long run. A staggering range. Ofwat, the regulator, seems to have sided with the company. In submissions to the courts, Ofwat presented the £4bn figure and Mr Maynard's £66m and chose only to comment that Mr Maynard's figure was the least evidenced. The Secretary of State Steve Reed has said that government involvement "would cost billions and take years". Eminent economist and infrastructure expert Professor Sir Dieter Helm argues that it could end up costing the government zero as the proceeds of a sale back to the private sector would eventually cover the costs incurred in the short to medium term by the government. A person close to the situation said "the idea that SAR is cost-free is fanciful and dangerous. It's time for the reality to be recognised. SAR is not a good outcome." Most importantly, the BBC understands that a figure in the billions may be included in the OBR's official forecast under the "risks to the outlook" section. The correct answer is that no one can be quite sure. What is uncontested is that in a so called Special Administration Regime (SAR), the financial and operational risks of the company transfer from the private to the public sector. In the short to medium term, the taxpayer will bear financial risks that are substantial. Thames has a plan to invest nearly £20bn over the next five years while it only has revenue of £2.3bn a year. The extra money comes from upfront borrowing that the company pays back through customer bills over many years. In a SAR, that upfront cost would be borne by the taxpayer. Longer term, when the company is sold back to the private sector, that money could be recouped – plus interest - from the sale proceeds. It's very hard to estimate what Thames would sell for. Well-performing water companies sell for around 50% of the value of their assets. Thames assets are worth around £18bn on paper – which would give a figure of £9bn. Given the age of those assets, the high operational costs of working around high population density and its miserable track record, it's very unlikely that Thames would sell for anywhere near that. Whenever the government rescues something with the intention of selling back to the private sector – it is always possible, likely even, they may get less money back than they put in. There are many examples of this - including British Steel and the RBS. As far as the government is concerned, rescuing Thames comes with a cost that would affect the public finances negatively over the course of this parliament. Given the well-publicised but self-imposed constraints on the Chancellor, it's not hard to see why the government would like to avoid it if possible. The other argument advanced by Mr Maynard in his appeal against the £3bn private lifeline – is that it will well end up being paid for by customers. Ofwat again decided to intervene on this, writing to the court that the company would be barred from recouping financing costs from customers. Thames itself argues there are other reasons a SAR would not be in the public interest. New administrators parachuted in to caretake a vast sprawling business would be ill-equipped to take on the task of turning around a company whose new management insists had formulated a clear plan. Thames would be a company in limbo with little momentum to get on with the mammoth task. People close to that plan fear suppliers could also be wary of extended payment terms under government-backed supervision. Those arguments may be nonsense. Attempts to prolong the life in its current form of a company laid low by years of under-investment, overgenerous pay and dividends, poor regulation and changing climate may be doomed. But what many, including government officials and ministers, ask themselves is – what is there to lose by letting the company have a go at restructuring and potentially redeeming itself over the next few years? If it fails, it fails and Special Administration is a mechanism that's been built into the system since privatisation and will still be there in six months, a year – by which time we will know whether they can do it or not. Taxpayers will suffer if Thames Water collapses, warns regulator Why is Thames Water in so much trouble?
Reuters
11-03-2025
- Business
- Reuters
UK's Thames Water rescue plan faces creditor-group appeal
LONDON, March 11 (Reuters) - Thames Water, Britain's biggest water supplier, faced another court battle on Tuesday as a group of its junior creditors started a legal challenge over a 3 billion pound ($3.9 billion) debt lifeline necessary to keep it afloat. The company is at the centre of a public backlash against the water industry. Mismanagement of Thames Water is blamed for sewage pollution in rivers, and for an 18 billion pound debt pile which has left it on the brink of financial ruin. Thames Water avoided a state rescue in February when it secured court approval for the new loans, but a grouping of junior creditors and a public interest group have appealed. The court will now sit until Thursday. Both groups object to the high cost of the new loans and want Thames Water to be put into the government's Special Administration Regime, a form of temporary nationalisation, which would keep water services operating before the company is eventually sold. Mark Phillips, the barrister representing the junior creditors, said on Tuesday that the debt lifeline gave senior creditors, which include Abrdn, Apollo Global Management, Elliott Investment Management, Invesco, M&G and PIMCO, "valuable additional rights", disadvantaging his clients. Special administration would treat "all creditors equally", the group said in legal documents. Lawmaker Charlie Maynard is leading the public interest group's appeal, which is focused on the environment and ensuring value for money for Thames Water customers and taxpayers. Arguments released on its behalf state that under the debt lifeline, the "terms and cost are much worse for the Thames Water rescue by special administration". Thames Water said the debt lifeline plan remained its best option, and would not financially affect taxpayers or customers. "It allows us to continue to invest in our network to improve critical infrastructure for our customers and the environment," a company spokesperson said. The government has repeatedly said it wants Thames Water to avoid administration and is focused on reforming Britain's privatised water sector to improve its environmental performance. But as the legal battle rumbles on, there are worries that Thames Water could run out of money. Following the outcome of the appeals, expected in the coming weeks, either party could decide to take the matter to the Supreme Court. Environment minister Steve Reed said on Monday the government was ready to step in if needed. ($1 = 0.7734 pounds)
