Thames Water’s £3bn loan to stave off collapse despite ‘eye-watering’ terms
The High Court ruled on Tuesday that the firm could press on with a crucial cash injection, even as some of its lenders and a Liberal Democrat MP for Oxfordshire said they would appeal against it.
Thames Water is England’s biggest water firm and supplies about 16 million households across London and the South East.
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The company has been at the centre of growing public outrage over the extent of pollution, rising bills, high dividends, and executive pay and bonuses at the UK’s privatised water firms.
It also has at least £16 billion of debt, and had previously warned it only had enough money to keep running until March 24, when it would have fallen into a temporary nationalisation.
In his Tuesday ruling Mr Justice Leech said Thames Water should be allowed to “finish the jigsaw” and find new investors before passing the costs of nationalisation onto the Government.
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The latest £3 billion, which would come in two £1.5 billion instalments, is enough to last Thames Water for a further one year.
It buys bosses more time to find a permanent source of funding, which will likely come by selling the company.
Liberal Democrat MP Charlie Maynard said he would appeal Tuesday’s decision, saying the £3 billion loan is not in the interests of customers and calling it a “futile, expensive, and extremely short-term bail out”.
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“This restructuring is simply throwing good money after bad,” he added.
The deal also comes with an unusually high 9.75% interest rate, plus fees, which over the 2.5-year life of the loan could result in about £800 million in extra payments to lenders, experts have said.
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“The costs of finance and adviser fees in the present case are very high. Indeed, they might be described as eye-watering,” wrote Mr Justice Leech.
“This is good news for our customers, puts our business on a firmer financial footing,” said Chris Weston, chief executive officer of Thames Water.
“Importantly, this decision will support the delivery of our turnaround.”
The company’s finances remain on a knife edge, and last week it asked regulators to allow it to raise customer bills by even more over the next five years than the 35% that had previously been granted.
