Cathryn Ross and Alastair Cochran, interim co-chief executives at Thames Water, have rejected a Parliamentary Committee’s comments about its current financial situation, according to a report in The Times newspaper this morning.

 The Times says it has seen a letter from the CEOs to the Chair of the House of Commons’ Environment, Food and Rural Affairs Committee in response to a statement issued on Friday evening.

Committee Chair Sir Robert Goodwill had released the following statement reacting to reports in the media on Thames Water’s financial arrangements:

“The news on Thames Water's financial arrangements today leads us to question the accuracy of evidence provided to our Committee by Thames Water in July. These recent revelations of Thames Water's financial situation raise further concerns about the stability of the company's finances and the actual ability of the company to invest the sums of money required to implement its turnaround plan.

“Thames Water customers need the company to solve the problems of unacceptable sewage discharge into water courses and water shortages during dry periods. Along with concerns over the implementation of the plans to remedy these problems, there are questions over the possibility that Thames Water customers will see a large rise in their bills associated with these plans.

“Our Committee will consider whether we need to call Thames Water back before us to explain how the evidence we heard stacks up against the recently reported revelations.”

According to The Times, the letter sent by Cathryn Ross and Alastair Cochran, interim co-chief executives of Thames Water, said the suggestion that a payment of £500 million by shareholders to Thames Water via Kemble Water Holdings had increased the water company’s £14 billion debt mountain was “incorrect and misleading.” The Times article also quotes the co-CEOS as saying Thames had received £500 million in cash from its existing external shareholders “with no obligation to repay this money” and that the funding would be “well understood” by investors in the water company and that it was “extremely unlikely that they would have concerns”.

In March 2023, Thames Water’s ultimate parent company, Kemble Water Holdings Ltd issued £515 million of Convertible Loan Notes to shareholders with net proceeds of £500 million after upfront fees. The net proceeds were cascaded to Kemble Water Eurobonds plc (KWE) by way of an intercompany loan which used £476.8 million of the proceeds to increase its investment into the equity of Kemble Water Finance (KWF) and £23.2 million to settle group relief liabilities owed to KWF. KWF then used the combined proceeds to settle £500 million of interest owed on its £3.1 billion intercompany loan from KWE, which KWE used to invest in a further £500 million of equity in KWF, resulting in a total increase of the share capital of KWF of £976.8 million. The net proceeds were further cascaded by KWF to Thames Water Utilities Ltd via intermediate holding companies.

Thames Water is due to publish its interim results tomorrow – to date water sector regulator Ofwat has remained silent on the issue and made no formal comment.

Commenting separately in parent company’s Kemble Water Finance Ltd’s (KWF) Annual report and consolidated financial statements for 2022/23 published in July 2023, the company’s auditor PwC said there was a “material uncertainty” about Kemble’s future relating to going concern for the company. This specifically related to the refinancing of a £190 million loan facility which is due for repayment in April 2024, for which there were “insufficient committed funds available” as at the date of the report.

PwC goes on to point out that while the Directors believe that KWF will be able to refinance the £190 million debt prior to April 2024, there was currently “no commitment from a finance provider and therefore no certainty this loan will be refinanced prior to April 2024.”

In addition, PwC says in the report while the KWF Directors had received an Equity Support Letter on 10 July 2023 from their shareholders indicating their intention to provide future support to the group, this was “not legally binding” and there were “no other firm commitments to refinance the £190m loan.”

“These conditions, along with the other matters explained in the accounting policies to the financial statements, indicate the existence of a material uncertainty which may cast significant doubt about the group’s and the company's ability to continue as a going concern.” PwC said.

Click here to read a more detailed analysis of Thames financial situation.