Thames Water announces plan to raise up to £3billion in emergency funding

Thames Water says it has strong investor backing for funding lifeline but will pay through the nose in interest while its debts are on course to hit almost £18billion

Embattled Thames Water has announced proposals to secure up to £3billion to avoid the risk of it being renationalised.

Britain’s biggest water company is hoping to get the money from investors. But it came as Thames also revealed it was down to its last £500million of cash and that its debt pile was expected to hit an eye-watering £17.9billion by March next year.

Thames Water, which serves about 16 million people, is in the grip of a funding crisis and previously said it only has enough cash to continue operating until May 2025. However, it has now announced it has brokered a deal with some of its creditors for a transaction to “extend its liquidity runway”.

It said the deal would involve an initial £1.5billion. A further £1.5billion - across two tranches of £750million - could be available if Thames Water appeals against what is expected to be a tough final decision from regulator Ofwat on how much it can raise bills over the next five years.

Thames has asked for permission to hike bills by 53%, whereas Ofwat has initially said it had increase prices by 21% - leaving a big gap between the two. While Thames looks to have secured funding, it will have to pay interest of 9.75% - far above market rates for other loans.

Chris Weston, the firm’s chief executive, said the lifeline would deliver “further progress to put Thames Water onto a more stable financial footing as we seek a long-term solution” to its financial troubles.

According to the BBC, potential future investors include Castle Water, the UK’s largest independent business water retailer, which bought Thames’ business customer operation in 2017. Castle Water was founded by Graham Edwards, who is the Conservative party’s treasurer and has donated millions of pounds to it over the years. Other possible buyers include Brookfield Asset Management, the Canadian investment giant chaired by the former Bank of England Governor Mark Carney and Hong Kong’s CKI, which already owns a stake in Northumbrian Water.

An Ofwat spokesperson said: “Ofwat has been clear that Thames Water needs to pursue all options to seek further equity to fund its turnaround for the benefit of customers and the environment. Today’s announcement is a positive step towards extending its liquidity runway and seeking a market-based solution to the company’s problems. Safeguards are in place to ensure that services to customers are protected, regardless of the issues faced by Thames Water.”