S&P Global Ratings has revised its outlook on Thames Water debt from stable to negative - S&P said the revision reflects its view of the water company’s current financial pressure “in the absence of improvement in operating performance.”
While the ratings agency said it noted positively the strong reduction in dividend distribution and the long-term build-up of regulated capital value, in S&P’s view the relatively high leverage under which the company currently operates is "limiting its ability to absorb any future additional weakening in profitability."
Announcing the revision, S&P said pressure on Thames Water's financial metrics had continued to build for the fiinancial year ending in March 2018 on the back of weaker credit ratios and below-average operational performance. Overall, Thames’ operating performance for the period had continued to be “largely subdued”. with penalties reaching £35.3 million, compared to £18.4 million the year before.
The agency added:
“Despite substantial proactive measures implemented by management to reduce operating underperformance, and the fact that Thames Water's operating performance has improved on several regulatory measures such as pollution and internal flooding, the company has continued to miss several of the regulatory targets for U.K. regulated water companies.”
Thames Water's operating performance was continuing to lag behind those of other U.K. water regulated companies, S&P observed.
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