Posted By Uma Rajagopal
Posted on April 22, 2024
UK’s struggling Thames Water proposes spending more on environmental improvements
By Sarah Young
LONDON (Reuters) -Britain’s Thames Water has proposed spending an additional 1.1 billion pounds ($1.36 billion) on environmental projects over the next five years, in an updated business plan aimed at winning regulatory support.
The company is at risk of nationalisation as it struggles under the weight of its 16 billion pounds of debt, and needs to agree a plan that will help tackle constant sewage leaks and provide some kind of return to investors, without requiring an unacceptable hike in customer bills.
Thames Water, which supplies about a quarter of the British population, was thrown into crisis last month when an existing business plan was branded “uninvestible” by its owners.
Under the new proposal published on Monday, Thames Water said the rise in expenditure would go on clean-up projects and would come without hiking customer bills by any more than the 40% jump it had already proposed for the 2025-2030 period.
While that may help win over the regulator Ofwat, the company also needs the backing of its shareholders, who in March refused to invest a 500 million pound equity lifeline.
Britain’s privatised water industry has come under scrutiny after sewage spills jumped in recent years, after a period when some owners had taken out big dividends and loaded firms up with debt.
Public outrage over pollution and the prospect of higher bills to fix the problem has put the regulator under pressure to ensure consumers get value for money, but investors say they still need to make returns, resulting in a stand-off over Thames Water.
“We will continue to discuss this with our regulators and stakeholders,” Chief Executive Chris Weston said.
The company said it could also fund a further 1.9 billion of investment into the business, but that would require an extra 19 pounds on household bills.
Thames Water has until June 12 to win approval for its plan under the deadline set by Ofwat.
The 40% rise proposed by Thames Water compares to the 31% increase proposed on average by the other water companies in Britain for the five year period.
Thames Water’s nine shareholders include Ontario Municipal Employees Retirement System, the UK’s Universities Superannuation Scheme, a unit of the Abu Dhabi Investment Authority and the China Investment Corporation.
($1 = 0.8077 pounds)
(Reporting by Sarah Young; Editing by Kate Holton, Kirsten Donovan)
