Thames Water has been granted an up to £3billion reprieve by a High Court judge, allowing the struggling utility to stay afloat just weeks before it was set to run out of money.
In a move branded a “national scandal” by a campaign group and a “disaster for Thames Water billpayers and the environment”, the plans to restructure England’s biggest water company, which has around 16 million customers, have been approved.
Thames Water Utilities Holdings Limited (TWUH), the parent company of Thames Water Group (TWG), needs £3.3 billion over the next five years to keep running as it faces roughly £16 billion of debt.
Earlier this month, Mr Justice Leech heard several days of arguments over whether to approve a restructuring plan, known as the “company plan”, which provides a loan of up to £3 billion with a 9.75 per cent interest rate, with a view to enabling operations until next year.
TWUH’s lawyers claimed the company would enter special administration (SAR) if the plan was not approved, but a smaller group of secondary creditors proposed an alternative plan known as the “B plan”, which the court heard would provide the company with the same funding but on better terms and should be adopted instead.
In a judgment on Tuesday, Mr Justice Leech ruled that the “relevant alternative” to the company plan being approved was SAR, and said: “After taking into account the public interest in ensuring the uninterrupted provision of vital public services, I nevertheless exercise my discretion to sanction the plan.”
A hearing before the same judge, dealing with consequential matters arising from the judgment, is set to begin later on Tuesday.
A hearing to consider whether the “B plan” can be put to creditors for approval could also be held on Wednesday.
Welcoming the ruling, Thames Water chief executive Chris Weston said: “This is good news for our customers, puts our business on a firmer financial footing, and enables us to continue to invest in our network and deliver critical infrastructure upgrades for our customers and the environment. Importantly, this decision will support the delivery of our turnaround which is under way.”
The High Court heard earlier in February that the restructuring was intended to be an interim measure to keep the company running before a substantive restructuring due later this year.
TWUH provides services through a direct subsidiary, Thames Water Utilities Limited (TWUL), which serves about 16 million customers – about 25 per cent of the UK’s population – and owns more than 20,000 miles of water mains and more than 68,000 miles of sewers across London, the Thames Valley and the Home Counties.
Tom Smith KC, for TWUH, told the court that letting it run out of money by not approving the company plan was “a risk which cannot be run”.
The company plan, drawn up by a cluster of investment giants including BlackRock, Abrdn and M&G, would effectively guarantee Thames Water can keep operating until 2026 by providing £1.5 billion of funding, with a further £1.5 billion potentially available.
It would also see payment dates for its debts extended by two years.
The court was told it had been approved by creditors holding more than 75 per cent of its Class A debt, which is worth about £11.5 billion and is the least risky class of bonds in its debt pile.
Charles Watson, chairman of River Action, said: “Instead of recognising now is the time for a special administration of Thames Water, the decision saddles customers with the responsibility for funding billions of junk-rated debt while its executives, investors and shareholders escape responsibility.
“Customers will now bear the brunt of massive interest payments through higher water bills, paying for corporate failure while our rivers remain choked with sewage.”
Mr Watson added that he was “extremely surprised that neither the government nor the water regulator, Ofwat, chose to give evidence in court”, calling the bailout “reckless”.
He called on the government to “take back control of Thames Water and put an end to years of environmental destruction and financial mismanagement”.
The Independent has approached the government for comment and Thames Water for further comment.
