Global investors have warned the Government over the prospects of attracting major infrastructure investment in the UK’s regulated utilities sectors in the light of Thames Water’s ongoing financial crisis, according to a front page report in the Business & Money section of yesterday’s Sunday Times.
The Sunday Times states:
“Singapore sovereign wealth fund GIC is among a clutch of overseas investors to have concluded that it would not look at opportunities in the UK in the regulated utility sector in the UK in the wake of the crisis engulfing Thames Water.”
Two weeks ago the Government said it had taken further steps to attract billions in private-sector investment into the water sector to rebuild broken water infrastructure and clean up Britain’s rivers, lakes and seas.
Secretary of State for Environment, Food, and Rural Affairs Steve Reed and Financial Secretary to the Treasury, Lord Livermore in the City of London hosted a roundtable with water industry investors on Tuesday 10th September.
Steve Reed commented at the time:
“With the new Government, the water sector will become one of growth and opportunity.
“Working with investors, we will attract billions in private-sector investment that is desperately needed to upgrade our broken water infrastructure and clean up Britain’s rivers, lakes and seas.”
The discussion marked a step-change as the Department for Environment, Food & Rural Affairs repositions itself as a key economic growth department.
However, according to the Sunday Times, the meeting quickly became “politely hostile “ and the major investors told Steve Reed “in no uncertain terms” that “Ofwat’s refusal to allow water companies to increase bills by as much they want had ramifications for wider investment in regulated utilities.”
Reports on Thames Water’s precarious financial position have continued to surface in a number of financial and business media outlets over the last month. A number have suggested that US and other oversea investors are poised to invest, with speculation ranging from the potential to buy in at a bargain price to charging Thames Water at a high rate of interest in the light of its “distressed” status.
On Friday last week Thames Water Utilities Finance plc announced that Thames Water Utilities Ltd (TWUL) had published a process update. The update followed TWUL’s previous announcement that following the PR24 draft determination and its response to Ofwat, the company would be engaging with potential investors and creditors to seek new equity and to extend its liquidity runway.
Thames Water engaging with financial stakeholder groups to enable better understanding of business plan and future funding needs
Thames Water has been engaging with financial stakeholder groups and their advisors since July 2024 – the company said it is assisting with information requests to enable financial stakeholder groups to better understand Thames Water's business plan and future funding needs.
As at 31 August 2024, Thames had £1.57 billion of liquidity consisting of £1.15 billion of cash and cash equivalents (£0.38 billion of which is currently required to be placed in reserves under its financing) and £0.42 billion of Class A and Class B undrawn committed facilities.
A further £0.55 billion of undrawn reserve liquidity facilities are available to support Thames Water should it enter standstill under its financing. “The combination of these resources provides a liquidity runway to May 2025”, the company says.
The process update states:
“As contingency planning, we have entered into discussions with our financial stakeholders to release cash reserves under our financing. This would require majority creditor consent. If consent were not forthcoming and should it not be possible to draw the Class A and/or Class B facilities, available cash and cash equivalents would expire at the end of December 2024, whereupon we would enter standstill under our financing and the £0.55 billion undrawn reserve liquidity facilities and £0.38 billion of cash reserves would become available.”
Thames Water together with its existing financial stakeholders, are currently considering options for the extension of its liquidity runway to enable time to complete a recapitalisation transaction.
The water company is planning to launch its formal equity solicitation process in the coming weeks. Any equity process is not expected to conclude until after the Final Determination, originally due in December 2024, which Ofwat are consulting on moving to January 2025. Thames would then have the option to request an appeal of the Final Determination to the CMA.
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