Environment Secretary steps up plans to nationalise Thames Water
The Environment Secretary has said the Government is stepping up plans to temporarily nationalise Thames Water after a US rescue bid collapsed.
Steve Reed confirmed to Parliament on Thursday that ministers were ready to save the struggling utility giant if necessary. A rescue would be in the form of a taxpayer-backed special administration scheme.
He said: 'The company remains financially stable, but we've stepped up our preparations and stand ready for all eventualities, as I've said before, including a special administration regime if that were to become necessary.'
A government intervention appears increasingly likely after US private equity giant KKR abandoned a bid for the company.
Thames's creditors have proposed an alternative £17bn rescue plan but it is contingent on regulators agreeing to waive historical fines. They have been pushing for ministers to intervene on the matter.
Mr Reed signalled this would not happen, casting doubt over hopes of a private sector-led solution. He said: 'Thames Water must meet its statutory and regulatory obligations to their customers and to the environment. It is only right that the company is subject to the same consequences as any other water company.'
Taking control of Thames would pile further strain on the Government's stretched finances. A previous report estimated that a state bailout would cost the taxpayer up to £4.1bn.
Thames, which has 16m customers across London and the South East, has been pushed to the brink of collapse as it struggles under the weight of £16bn in debts.
Creditors have said that a 'regulatory reset' is needed to ensure the company is financially viable. A source close to the lenders said they were urging regulators 'not to reach back into history' and instead focus on Thames Water's turnaround efforts moving forward.
A senior figure involved in the talks told The Telegraph last week: '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?''
Thames Water was handed a record fine of £123m in May and the company could be on the hook for more than £1bn in pollution and environmental failing penalties in future, according to creditors.
The £17bn support package proposed by creditors includes writing off several billion pounds of debt and an immediate £3bn cash injection.
If their deal falls apart, special administration is the most likely outcome for Thames.
A spokesman for the creditors said: 'This investor group is committed to working with the Government and regulators to agree a pragmatic plan that recognises what Thames Water can realistically deliver and they expect to be held accountable for an ambitious trajectory for the company's return to compliance.
'More than £10bn would be written off to get the company back to investment grade, expected to be the largest financial loss on an infrastructure asset in British history.'
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