Ministers have lined up insolvency practitioners to organize for the potential collapse of Thames Water, Britain’s greatest water utility.
Sources stated on Tuesday that the advisory position established FTI Consulting because the frontrunner to behave as the corporate’s administrator if it fails to safe a non-public sector bailout – though approval of such an appointment could be determined in courtroom.
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Thames Water, its largest group of collectors and Ofwat, the trade regulator, have been locked in talks for months a couple of deal that will see its lenders injecting about £5bn of latest capital and writing off roughly £12bn of worth throughout its capital construction.
The discussions are stated to be progressing constructively, though they seem to rely partly on the prospect of the corporate being granted forbearance on a whole lot of thousands and thousands of kilos of regulatory fines.
“The company remains financially stable, but we have stepped up our preparations and stand ready for all eventualities, including applying for a Special Administration Regime if that were to become necessary.”
Insiders confused that FTI Consulting’s engagement by the Division for the Atmosphere, Meals and Rural Affairs (DEFRA) didn’t sign that Thames Water was about to break down into insolvency proceedings.
A SAR would be certain that prospects would proceed to obtain water and sewage providers if Thames Water collapsed, whereas placing taxpayers on the hook for billions of kilos in bailout prices – a situation the chancellor, Rachel Reeves, is eager to keep away from at a time when the general public funds are already severely constrained.
The SAR course of can solely be instigated within the occasion that an organization turns into bancrupt, can now not fulfil its statutory duties or breaches an enforcement order, in keeping with insiders.
Mr Reed has repeatedly confused the federal government’s need to keep away from taking Thames Water into non permanent public possession, however that it was able to take care of “all eventualities”.
“Thames Water must meet its statutory and regulatory obligations to its customers and to the environment–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 have stepped up our preparations and stand ready for all eventualities,” he advised the Home of Commons in June.
Thames Water, which has about 16m prospects, serves a couple of quarter of the UK’s inhabitants.
It’s drowning beneath near £20bn of debt, and was beforehand owned by Macquarie, the Australian infrastructure and banking behemoth.
Its most up-to-date consortium of shareholders, which included the Universities Superannuation Scheme and an Abu Dhabi sovereign wealth fund, have written off the worth of their investments within the firm.
The federal government’s SAR course of has solely been examined as soon as earlier than, when the power retailer Bulb failed in 2021.
Bulb was in the end offered to Octopus Power with the taxpayer funding used to avoid wasting and run the corporate since having been repaid.
Thames Water is racing to safe a rescue plan involving funds corresponding to Elliott Administration and Silver Level Capital, with a deadline of late October to enchantment to the Competitors and Markets Authority in opposition to Ofwat’s ultimate willpower on its subsequent five-year spending plan.
Ofwat has dominated that Thames Water can spend £20.5bn throughout the interval from 2026, with the corporate arguing that it requires an additional sum of roughly £4bn.
Mike McTighe, a veteran company troubleshooter who chairs BT Group’s Openreach division, has been parachuted in to work with the funds.
The corporate stated in its accounts final month that there was “material uncertainty” over whether or not it might be solvently recapitalised.
Earlier this yr, Thames Water was fined a report £123m over sewage leaks and the cost of dividends, with Ofwat lambasting the corporate over its efficiency and governance.
In current weeks, Thames Water has been engulfed in a row over the legitimacy of bonuses paid to chief government Chris Weston and different bosses, even because it makes an attempt to safe its survival.
Underneath new legal guidelines, Thames Water is amongst half a dozen water corporations which have been barred from paying bonuses this yr due to their poor environmental information.
The creditor group was successfully left as the only bidder for Thames Water after the non-public fairness agency KKR withdrew from the method, citing political and reputational dangers.
The Hong Kong-based investor CK Infrastructure Holdings (CKI), which already owns Northumbrian Water, has sought to re-engage in talks a couple of rescue deal however has gained little traction in doing so.
He has been changed by Chris Walters, one other Ofwat government, on an interim foundation.
