Capital Economy, Business and Finance
Thames Water executives admitted to the UK parliament’s Environment Committee on Tuesday that the company doesn’t have the money to pay back an £190 million loan due in April next year. It will ask lenders for an extension – and customers will end up paying.
Thames’s parent company, Kemble Holdings, owes a total of £18 billion in debt. MPs also questioned the company’s complex structure, its environmental performance and why it had described a loan from shareholders as “equity”.
Newly-appointed Thames Water chair Adrian Montague began the committee session by apologising for “any confusion” over the “slightly strange” convertible loan.
MPs aren’t buying it. “Thames Water has displayed a culture that is cavalier with the truth,” Barry Gardiner MP told Tortoise. “Their holding company established a complex financial vehicle to claim that their debt is in fact an equity injection to Thames Water that bill payers are not liable for.
The truth is that the holding company receives no revenue except from Thames Water. Repayment of the debt therefore can come from only one source – you and me: the billpayers.”
Thames, which serves 15 million UK households, is seeking to raise £2.5 billion from shareholders over the next few years in order to update its aging infrastructure.
The equity is subject to the regulator, Ofwat, agreeing to a 40 per cent increase in customers’ bills by 2030. Executives from Ofwat were also summoned to appear in front of the select committee to answer what they knew about the state of Thames’s finances.
They agreed that finances across the sector are “not in the shape they ought to be” and that there was a risk Thames would use fresh cash to “make dividend payments to support debt at the holding company structure”. Gardiner accused Thames of having the regulator “by the short and curlies” – if Ofwat doesn’t agree to a rise in bills it will essentially lead to a quasi-nationalisation of the business that could cost the taxpayer billions.