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Thames Water has said it has received interest from six potential investors to inject fresh equity into the UK’s largest water company, and that it hopes to agree terms by the end of June as it seeks to turn around its finances.
The utility, which serves 16mn households in and around London, cautioned on Tuesday that five out of six of the proposals would see creditors to the beleaguered company take large writedowns in exchange for taking a stake, and that all the offers were “conditional on further, and varying, regulatory support and accommodations being achieved.”
This includes a halt to regulatory fines which the company worries could wipe out any equity injected into the business, the Financial Times previously reported.
Although Thames Water said it was hoping that a deal would be completed by September, it warned that “there is no certainty that a binding equity proposal will be forthcoming or that any such proposals will be capable of being implemented”.
The announcement follows a Court of Appeal ruling on Monday that approved a highly contested £3bn loan to the company by creditors, including the US funds Apollo and Elliott. This loan is one part of a wider restructuring process that should stave off temporary renationalisation. The process also includes the parallel equity raise to find new shareholders to own the business.
Thames Water is struggling under nearly £20bn of debt and has warned it will run out of cash by the end of this month without the loan.
Investors weighing a bid so far include KKR, CK Infrastructure, Covalis Capital, Castle Water and the group of class A creditors responsible for the £3bn loan.
Some of the bidders are understood to be interested even if the company is temporarily renationalised under the government’s special administration regime.
In a move that underscores the overlapping timetables and conditions that Thames Water must balance, the company also said on Tuesday that it would delay an appeal to the Competition and Markets Authority over the amount by which the company can raise customer bills.
Ofwat had agreed to a deferral because it considered that this “creates the opportunity to recapitalise and transform the business sooner than is likely to be possible if the company remains in the CMA”.
The sector regulator said in December that Thames Water could increase bills by 31 per cent — which would mean household bills rise on average by £151 to £639 this year; significantly less than the company had requested. It indicated last month that it would appeal against Ofwat’s so-called final determination to the CMA.
Thames Water has also agreed with Ofwat that it may be allowed to raise bills higher if it can find suppliers to deliver infrastructure improvements.
Thames Water Utilities Ltd said it “remains of the view that the final determination does not serve the interests of Thames Water’s customers, communities and the environment”.
“However, TWUL has concluded that recent discussions hold out the prospect of unlocking a market led solution for the recapitalisation of the company, including through an equity raise, without the need for a CMA reference.”
The news came as five other companies — Anglian Water, Northumbrian Water, South East Water, Southern Water and Wessex Water — were all referred to the CMA, Ofwat said.
The regulator noted that “many customers are already expressing concerns about the level of increase”.
