More Troubling News In The Thames Water Pipeline

Posted on Apr 22, 2024. by NTI

Thames Water is having another crack at persuading the regulator to let it raise consumer bills by up to 44% over the next five years by increasing investment.  Regulator, Ofwat, had dismissed the company's first attempt, leading to questions over the firm's future.

Thames is the UK's largest water company, with 16 million customers in London and the Thames Valley region, including those in Swindon and Oxford.  However, it currently has debts of circa £14.7bn: when your debts are approximately seven times your annual income from customers’ bills, there’s a problem isn’t there?

The original plan was to invest £18.7bn between 2025 and 2030 and increase customer bills by 40%, on top of inflation, over the five-year period.  Ofwat rejected this proposal, prompting shareholders at Thames' parent company, Kemble Water, to withdraw a proposed cash injection and default on debt interest payments.  Kemble Water formally told lenders earlier this month it failed to meet a deadline to pay interest on £400m of debt as well as a loan repayment of £190m due at the end of April.  It politely issued a notice to its bondholders but asked them to take "no creditor action" in order to enable a "stable platform" for negotiations.  Hmmm.

The second plan by Thames promises a new total investment of £19.8bn (up £1.1bn with this extra being spent on "projects benefiting the environment", although as ever the details of these projects were about as clear as the water in the Thames currently.  This Plan B would still require customer bills to rise by 40%, reaching an annual average bill of £608.30 by 2029-30.  Alternatively, Thames said it had a Plan C in which it could potentially increase investment by another £1.9bn, although that would lead to average bills rising by 44% to £627.

Thames is not alone in planning big prices rises over the next few years, against a backdrop of sewage spills into rivers and the sea which culminated in the crews at the Boat Race being strongly discouraged from entering the water.  In October last year, Southern Water proposed a 66% price rise on top of inflation, while Severn Trent put forward a 37% increase.

Mike Keil, interim chief executive at the Consumer Council for Water, said: "On the surface, the proposal for more investment from Thames Water is a positive step for its customers that have endured some of the worst customer service in the sector."  However, he added that only 16% of its customers thought the proposed bill increases in the five-year plan were affordable. "This announcement appears to offer nothing to ease the fears of those already struggling to pay," he said.

It is thought that a final decision from the regulator will be made next month.  It surely isn’t a coincidence that The Water Industry (Special Administration) Regulations 2024 and The Water Industry (Special Administration) (England and Wales) Rules 2024 were passed earlier this year, is it?

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