Latest news with #Ofwat
Times
6 hours ago
- Business
- Times
Thames Water given special administration warning by minister
The government has given the strongest indication yet that it is preparing to put Thames Water into administration. Answering questions in the Commons, Steve Reed the environment secretary, was asked to comment on backbench unease that a consortium plotting a takeover of Thames Water is lobbying Ofwat, the regulator, to ease up on the fines and penalties it is levying against the company for past misdemeanours and ongoing poor performance. In response Reed told MPs: '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.' He continued: '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 special administration regime is the option of last resort for the troubled company and would involve the appointment of professional accountants and be likely to wipe out all creditors in an attempt to refinance the business. A consortium of creditors of Thames Water who are already propping up the £19.25 billion in-debt London and Thames Valley supplier, have proposed a £5 billion refinancing over and above £3 billion of bridging loans that are currently keeping the company in business. However, those creditors have made it plain that their proposals can work only if Ofwat is prepared to offer a 'recalibration' of Thames Water's five-year funding settlement and performance targets. As the settlement currently stands, which demands reductions in environmentally-damaging pollution incidents and wasteful mains leakage plus other metrics, Thames could face up to £1 billion of fines and penalties for not hitting the targets in the coming years. The creditors plotting the takeover include major UK institutions such as Aberdeen, Invesco and M&G, large international finance houses such as BlackRock and Apollo, as well as distressed-debt dealers such as Elliott and Silver Point Capital. They have stepped in after the infrastructure investment arm of KKR, the American private equity house, walked away last month from a £4 billion recapitalisation plan. A spokesman for the creditors backing the takeover said: 'Broad regulatory support is needed to unlock a market-led solution for Thames Water that will secure billions of pounds in fresh investment for its ageing network. '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 £10 billion 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.'
The Guardian
12 hours ago
- Business
- The Guardian
Ministers stepping up preparations for renationalisation of Thames Water
The environment secretary, Steve Reed, has said the government is stepping up preparations for temporary nationalisation of Thames Water, indicating it will reject pleas from the company's creditors for leniency from fines and penalties. Thames Water's largest creditors control the utility, and have made a bid to cut some of its debts and provide £5.3bn in new funding to try to turn it around. However, the creditors have said their plan needs considerable leniency from Ofwat, the government's water regulator for England and Wales, and the Environment Agency over fines for environmental failings. The Guardian this month revealed that the creditors had asked for immunity from prosecution for serious environmental crimes in return for taking on the company. Reed on Thursday told parliament that Thames Water must meet its statutory obligations, after being asked about possible 'regulatory easements'. 'Thames Water must meet its statutory and regulatory obligations to their customers and to the environment,' he said. 'It is only right that the company is subject to the same consequences as any other water company. 'The company remains financially stable, but we've stepped up our preparations and stand ready for all eventualities, as I've said before, including special administration regime if that were to become necessary.' Sign up to Business Today Get set for the working day – we'll point you to all the business news and analysis you need every morning after newsletter promotion More details soon …
Yahoo
3 days ago
- Business
- Yahoo
Water sector needs ‘root-and-branch' reform, MPs say
The water sector is in need of 'root-and-branch reform', a committee of MPs has said as it called for 'much more regulated management' of bonuses for senior bosses. The cross-party Environment, Food and Rural Affairs committee has said that the industry is 'failing', but that water companies are 'deaf to the crisis' that it is facing. In their report, Priorities For Water Sector Reform released on Monday, the MPs argue that the Government 'should feel able to use its temporary nationalisation powers' when needed. They also said the system should 'ensure that more money gained from investors and through customer bills is directed towards investment in water infrastructure and service delivery' and less towards debt repayment or financial rewards for executives. The system of fines and rewards should also focus on a reduction in pollution incidents, responsible ownership and the need for the sector to have long-term resilience, the MPs said. 'Despite some initial success after privatisation in 1989, root-and-branch reform of the water sector is now needed to improve the sector's culture,' the committee said. As part of their investigation, the MPs found that 'public disquiet has increasingly turned to outrage' at the way water companies and their bosses are benefiting from the sector. 'Over hearings with 10 of the largest water companies and Ofwat, we regularly encountered a culture that is deaf to the crisis thesector is facing,' they said. Committee chairman Alistair Carmichael, a Liberal Democrat MP, said the sector 'must not shy away from bold proposals' and that it has a 'serious culture problem'. He said: 'Water companies' complex and sometimes impenetrable financial structures, with their myriad subsidiaries, holding companies and parent organisations, seem to suggest that their purpose is less to provide a good service to their customers and more to allow them to juggle their finances and their increasingly unsustainable levels of debt. 'Meanwhile, an ineffective regulatory system has failed to protect customers, the environment and the financial stability of the sector. 'It has failed to ensure that companies invest in essential infrastructure and it has not encouraged long-term thinking. 'This has got to stop now. Trust and accountability in the water sector are very low. 'It is not acceptable that it has fallen to commendable citizen scientists to expose issues with local water resources. 'Environmental protection and the delivery of reliable and safe water must be the first priorities of water companies and regulators.' A Defra spokesperson said: 'Our rivers, lakes and seas are polluted, and our water system is broken. 'As part of the plan for change, new legislation has banned unfair multimillion-pound bonuses for bosses at six water companies and launched a record 81 criminal investigations. 'This Government has also secured the largest investment into the water sector in history, with £104 bn in private sector investment to clean up rivers, lakes and seas and cut sewage by nearly half by 2030.' A Water UK spokesperson said: 'Everyone agrees that the water system is not working, and we have been calling for fundamental reforms which allow investment to get quickly to where it needs to go. 'In the meantime, companies are focused on investing a record £104 billion over the next five years to secure our water supplies, end sewage entering our rivers and seas and support economic growth.' Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Reuters
3 days ago
- Business
- Reuters
Focus: As Thames Water fights for survival, crumbling assets show challenge ahead
TWICKENHAM, England, June 17 (Reuters) - Fifteen times a year, the sheer volume of waste water entering Thames Water's Mogden sewage works in southwest London overwhelms its 90-year-old concrete tanks, forcing the utility to pump excrement into the River Thames. Hidden by woodland, the plant illustrates the crisis at Thames, which supplies water and sewage services to 16 million customers in southern England. Loaded with debt after being privatised in 1989, the company is struggling to survive, let alone get to grips with the crumbling facilities in its care. U.S. private equity firm KKR this month walked away from a plan to inject 4 billion pounds ($5.4 billion) of equity, leaving Thames' fate in the hands of senior creditors now negotiating a rescue deal with water regulator Ofwat. The group including investment-grade lenders and hedge funds has offered to invest 5 billion pounds of new equity and debt and write off around 20% of the value of their existing debt, in return for a reset of the environmental and investment regime. Without a deal, the British government - already struggling with constrained public finances - may have to take control of a business that caused outrage by polluting waterways while paying dividends and bonuses to its previous owners and managers. The prospect Thames might collapse has unnerved investors and risks pushing up the cost of borrowing needed to upgrade electricity grids, transport and other UK infrastructure. But the rescue deal would bring its own costs, financial and political. Creditors say turning the company around will require leniency on some of the 1.4 billion pounds in pollution fines and penalties Thames Water expects from regulator Ofwat and the Environment Agency in this five-year cycle. "Time is running out," a senior creditor involved in the plan told Reuters, adding that Ofwat was now listening to their proposal after months of no engagement. "We're asking for a little bit of movement and we're there." The creditor, who spoke on condition of anonymity because talks are private, is one of more than 100 who hold more than 13 billion pounds ($17.7 billion) of Thames's 20 billion pounds of debt, and who are promising to invest in sites like Mogden. Dave Chowings, a Mogden plant manager, set out the scale of the challenge to Reuters on a recent visit. Pointing at storm tanks the size of Olympic swimming pools, he said: "All that concrete is 90 years old. It needs rebuilding." In months of due diligence, KKR visited plants like Mogden to assess how much money was needed to bring them up to scratch. Water industry consultant Martin Young said Ofwat faced a pivotal moment in finding a solution, after it was criticised for failing to prevent the pollution scandal. "If they don't move, then we do run the risk of being stuck in this doom loop. That's a doom loop for Thames, but also you can extend that out to the wider industry," he said. Ofwat said it had started a review of the senior creditors' submission, including their turnaround plans, approach to financial resilience and proposals for governance. "Our focus is on assessing whether the plans are realistic, deliverable and will bring substantial benefits for customers and the environment," a spokesperson said. The government pointed to a previous statement saying Thames was stable and it was carefully monitoring the situation. According to critics of water privatisation, the failings at Thames reflect decades of regulatory and political failure, with successive governments focused on keeping customer bills down rather than driving investment. And giving Thames Water the special treatment the creditor group is asking for on regulation would be politically toxic. Ash Smith from campaigning group Windrush Against Sewage Pollution said the terms being demanded by the creditors showed that nationalisation was the only answer. "Customers have had enough of owners who base their business model on being able to flout the law," he said. The 20% "haircut" proposed by the senior creditors has also enraged junior debt holders, who face being wiped out. Thames Water's 2040 bond is currently bid at 68.99 pence on the pound in scarce trading, according to Tradeweb data. Whoever takes over Thames will face a huge challenge. Mogden, which serves more than 2 million people across west and north London, has struggled to cope with population growth and storms associated with climate change. Thames has spent 100 million pounds at the site in five years and will spend the same amount over the next five. But four of its storm pumps were made in the 1930s by the company that built the Titanic, and it is getting harder to find people who know how to maintain them. "Historically, funding for our asset renewal has not been sufficient to offset the deterioration of our assets," Thames Water Chief Executive Chris Weston said in a letter to a committee of lawmakers on May 30. While customers want cleaner rivers, they say they should not have to pay out for the mismanagement of the company. "I believe water has been too cheap for too long but on the other hand I'm not prepared to pay for what we've already forked out for," said Thames Water customer Laura Reineke, 52, a charity worker. ($1 = 0.7362 pounds)
ITV News
3 days ago
- Business
- ITV News
Water sector needs ‘root-and-branch' reform, MPs say
The water sector is in need of 'root-and-branch reform', a committee of MPs has said as it called for 'much more regulated management' of bonuses for senior bosses. The cross-party Environment, Food and Rural Affairs committee has said that the industry is 'failing', but that water companies are 'deaf to the crisis' that it is facing. In their report, Priorities For Water Sector Reform, released on Monday, the MPs argue that the UK Government 'should feel able to use its temporary nationalisation powers' when needed. They also said the system should 'ensure that more money gained from investors and through customer bills is directed towards investment in water infrastructure and service delivery' and less towards debt repayment or financial rewards for executives. United Utilities was also one of six water companies banned earlier this month from paying bonuses to senior bosses. A new law has been introduced which will prevent bonuses from being paid if a water company does not meet environmental or consumer standards, does not meet financial resilience requirements, or is convicted of a criminal offence. The system of fines and rewards should also focus on a reduction in pollution incidents, responsible ownership and the need for the sector to have long-term resilience, the MPs said. 'Despite some initial success after privatisation in 1989, root-and-branch reform of the water sector is now needed to improve the sector's culture,' the committee said. As part of their investigation, the MPs found that 'public disquiet has increasingly turned to outrage' at the way water companies and their bosses are benefiting from the sector. 'Over hearings with 10 of the largest water companies and Ofwat, we regularly encountered a culture that is deaf to the crisis the sector is facing,' they said. Committee chairman Alistair Carmichael, a Liberal Democrat MP, said the sector 'must not shy away from bold proposals' and that it has a 'serious culture problem'. He said: 'Water companies' complex and sometimes impenetrable financial structures, with their myriad subsidiaries, holding companies and parent organisations, seem to suggest that their purpose is less to provide a good service to their customers and more to allow them to juggle their finances and their increasingly unsustainable levels of debt. 'Meanwhile, an ineffective regulatory system has failed to protect customers, the environment and the financial stability of the sector. 'It has failed to ensure that companies invest in essential infrastructure and it has not encouraged long-term thinking. 'This has got to stop now. Trust and accountability in the water sector are very low. 'It is not acceptable that it has fallen to commendable citizen scientists to expose issues with local water resources. 'Environmental protection and the delivery of reliable and safe water must be the first priorities of water companies and regulators.' A Defra spokesperson said: 'Our rivers, lakes and seas are polluted, and our water system is broken. 'As part of the plan for change, new legislation has banned unfair multimillion-pound bonuses for bosses at six water companies and launched a record 81 criminal investigations. 'This Government has also secured the largest investment into the water sector in history, with £104bn in private sector investment to clean up rivers, lakes and seas and cut sewage by nearly half by 2030.' A Water UK spokesperson said: 'Everyone agrees that the water system is not working, and we have been calling for fundamental reforms which allow investment to get quickly to where it needs to go. 'In the meantime, companies are focused on investing a record £104 billion over the next five years to secure our water supplies, end sewage entering our rivers and seas and support economic growth.'
