Thames Water has warned it could collapse into temporary nationalisation if emergency talks with creditors fail, as it reported a £1.6bn annual loss. The loss for the year to 31 March compares with a profit of £154m the previous year, despite revenues rising 8.7% to £2.7bn. Net debt increased to £16.8bn from £15.2bn.
The company, which supplies 16 million customers in London and the south-east, is scrambling to stabilise its finances and agree a rescue plan funded by creditors to avoid potential temporary nationalisation. In its annual report, Thames issued a 'going concern' warning, stating that failure to secure a recapitalisation transaction could lead to 'special administration' – effectively nationalisation.
Chief executive Chris Weston said: 'We are progressing with our senior creditors’ plan to recapitalise the business... This will come with a requirement to reset the regulatory landscape and acknowledge it will take at least a decade to turn Thames around.' The annual loss included a £1.27bn provision against a loan from its parent company, £122m in fines, and £285m of financing costs.
Appearing before MPs, Weston confirmed the company had appealed to the government to waive fines, arguing it cannot pay penalties for sewage pollution while also turning the business around. Thames has scrambled for emergency funding amid a £20bn debt pile, but said creditors remained 'supportive' and it had £424m of available cash.
The company reported a 13.2% reduction in water leaks and a 16.6% fall in household complaints, but total pollution incidents rose by more than a third to 470. Weston attributed the rise to rainfall and high groundwater levels, adding that proactive sewer cleaning should improve future performance. No performance-related bonus was paid to Weston, who received total pay of £1.035m.
Thames handed almost £2.5m in bonus payouts to 21 senior managers using money from an emergency loan intended to keep the company afloat. Under new Labour government powers, regulator Ofwat can now ban bonuses for water executives where companies fail to meet standards. Creditors are the lead contenders to take formal ownership in return for £5.3bn in equity and debt, after US private equity firm KKR pulled out of a rescue deal.
