A creditor consortium bidding to rescue Thames Water has unveiled plans for a Thames Water board overhaul, naming four new directors it intends to appoint if the Government approves its rescue deal and spares Britain’s largest water supplier from nationalisation.
Thames Water is the company that supplies water and wastewater services to around 16 million customers across London and the South East. It has accumulated a debt mountain of over £20 billion and is currently without a long-term financial fix after a previous rescue deal collapsed.
The Proposed Thames Water Board Overhaul
The London & Valley Water consortium has put forward former Yorkshire Water chief executive Liz Barber as one of the first tranche of proposed non-executive directors. Dame Bernadette Kelly, formerly the permanent secretary at the Department for Transport, and Clive Selley, ex-chief executive of BT Openreach, would also join the board. Infrastructure expert Mike McTighe has already been proposed as a board member should the bid be accepted.
The consortium is presenting the board appointments as a signal to the Government that the company would be under credible, experienced leadership. Governance has been a central concern in talks, with ministers and regulators needing assurance that Thames Water would be run differently from the way it has been managed during its financial decline.
McTighe set out what the new board would prioritise if the deal goes through. ‘If this recapitalisation plan is accepted, we will apply full dedication as a new board, working alongside the executive team to transform the business and build a culture in which the customers and local communities who depend on Thames Water come first,’ he said. ‘We will focus relentlessly on protecting public health and safety, respecting and improving the local environment, ensuring what people pay for their water is fair and the most vulnerable are protected, investing to secure clean and reliable water supplies for current and future generations, and being accountable for what we do. It will take time to fix Thames Water, but we are committed to rebuilding trust with the customers and public Thames Water serves.’
What the Rescue Deal Would Actually Involve
The financial structure of the proposal is substantial. According to Reuters, the investor group would write off £4 billion of existing Class A debt, £1 billion of Class B debt, and an effective £2.5 billion of holdco debt, alongside a £3.15 billion equity commitment. BBC News reports that the consortium would write off about a third of the company’s near-£20 billion debt pile and invest an initial £5.4 billion to stabilise its finances.
According to Smart Water Magazine, the proposal would see Thames Water receive £3.35 billion in new equity and up to £6.55 billion in new debt, with a total expenditure of £20.4 billion planned for infrastructure investment, asset maintenance, and environmental compliance. That spending would cover the full AMP8 regulatory period, which runs from 2025 to 2030. AMP8 refers to the eighth Asset Management Period set by water industry regulator Ofwat, the framework within which water companies agree their investment plans.
Smart Water Magazine also reports that a Thames Water Community Benefit Trust would be established, initially funded with £25 million by the consortium to support local environmental and community projects.
Government Backing Remains the Key Obstacle
The London & Valley Water consortium includes UK and US investment companies such as Elliott Management and Aberdeen Investments, as well as American private capital firm Apollo Global Management. Last month, the consortium said it was looking at offering a ‘golden share’ to the Government as part of a revised rescue deal, a mechanism that would give ministers a form of oversight or veto power.
The consortium is said to be hoping to secure agreement from Ofwat and the Government this autumn, having warned it is set to run out of cash as soon as October. A rescue plan by creditors is seen as the final realistic option to avoid Thames Water being placed into a special administration regime (SAR), a form of temporary public control, after a previous rescue deal with KKR collapsed.
Prime Minister Andy Burnham has signalled he wants a 10-year plan to renationalise the water industry. The Government has previously said it would prefer a market solution, though former environment secretary Emma Reynolds warned in June that she did not believe the creditors’ £10 billion plan went far enough to protect customers or the environment. Former farming minister Dame Angela Eagle was last month appointed as the new Environment Secretary by Mr Burnham, and it is understood she has not yet met with the creditors consortium regarding the rescue deal.
