Thames Water CEO Chris Weston has issued a detailed announcement via the London Stock Exchange in response to recent press speculation about the terms of the London & Valley Water (L&VW) consortium's proposal for the turnaround, transformation and recapitalisation of Thames Water.

L&VW has confirmed to Ofwat and the company its revised proposal for the turnaround, transformation and recapitalisation of Thames Water.

Weston begins by saying that since June 2025, Thames Water, L&VW, Ofwat and other regulators have been engaged in constructive discussions regarding the proposed turnaround, transformation and recapitalisation of Thames Water.

L&VW's funding is conditional on further engagement, prior to completion of the restructuring, with Thames Water's regulators on enforcement matters.

L&VW proposes Thames Water "would not be subject to outcome delivery incentives regime during AMP8"

Referring to the outcome delivery incentives regime, the announcement says that under the proposal Thames Water "would not be subject to the outcome delivery incentives regime during AMP8, but would have an ambitious set of minimum expectations and performance targets." 

The L&VW proposal is non-binding and remains subject to ongoing review by the company, Ofwat and other regulators, and subject to discussion with the company's financial stakeholders.

The proposal has been subject to further engagement with Ofwat and other regulators to deliver improved customer outcomes and secure long-term financial resilience. 

No certainty that the proposal will be accepted or that it will be finalised in its current form

The statement cautions that as engagement remains ongoing, there is no certainty that the proposal will be accepted or that it will be finalised in its current form. At this stage, the company's Board, Ofwat, other regulators and relevant investment committees have made no decision to accept and take forward the L&VW Proposal to implementation.

In the event Ofwat is minded in principle to accept any proposals put forward, these would be fully conditional upon Thames Water and L&VW delivering the agreed recapitalisation, and Ofwat would need to consult upon any related regulatory measures.

Alongside this, Thames Water expects that, if it reaches agreement with financial stakeholders, it would seek a lock-up to enable implementation of the proposal via a scheme of arrangement under Part 26, or a restructuring plan under Part 26A of the Companies Act 2006.

Implementation of the L&VW consortium’s proposal depends on the company continuing to be able to access funding under its existing accordion facility and the waiver of certain conditions.

Highlights of the L&VW proposal

The L&VW Proposal would see Thames Water obtaining £3.35 billion of new equity and up to £6.55 billion of new debt ( made up of £3.25 billion of day-1 debt and up to £3.30 billion of committed undrawn debt, providing the capital) required to deliver a proposed ambitious Performance Improvement and Turnaround Plan (PITP) for the entirety of AMP8 (2025-2030).

According to the statement issued this morning, the PITP and the new capital investment would enable Thames Water to deliver £20.4 billion of totex in AMP8, subject to a reset of Price Control Deliverables and agreed gating and delivery mechanisms, with a focus on:

• investing to address critical risks;
• strengthening asset health to address asset deterioration and improved maintenance;
• enhancing resilience;
• progressively improving legal, regulatory and environmental compliance over time.

Customer bills in AMP8 set remain in line with those contemplated in Ofwat’s Final Determination

Customer bills in AMP8 would, subject to reflecting the CMA WACC, remain in line with those contemplated in Ofwat’s Final Determination. L&VW would commit to an excess value share mechanism from the proceeds of any eventual sale of the business above agreed levels, which would see certain benefits of the turnaround shared with customers. In addition, under the L&VW Proposal there would be an enhanced asymmetric aggregate sharing mechanism with reduced thresholds.

Under the L&VW Proposal, all outstanding fines would be paid, with L&VW making a significant up-front and ring-fenced investor and redress commitment, without recovery from customers (above and beyond balance sheet recapitalisation commitments).

An independent Thames Water Community Benefit Trust would also be established and initially funded by L&VW with £25 million in cash to invest in local benefit schemes and projects, including environmental and wildlife support.

The L&VW Proposal would see the following commitments from the the water company's largest shareholders:

• to lock-up (and not sell) a significant proportion of their equity investment during AMP8
• to there being no majority trade sale of the equity of the Company to a third party during AMP8, supported by enhanced ultimate controller undertakings
• to a commitment to undertake and regularly refresh a strategic options review for Thames.

The consortium would also agree that Thames Water would not pay a dividend before 1 April 2035, or until the company is returned to the listed markets (if earlier)), to ensure cash is re-invested in improving the business in support of the turnaround.

L&VW proposes 30% write-off of Class A Debt and write-off in full of Class B Debt

The L&VW proposal envisages that Thames's balance sheet would be recapitalised based on a 30 per cent. write-off of Class A Debt and a write-off in full of the Class B Debt and any subordinated debt or equity held by existing shareholders.

Day-1 net leverage is anticipated to be 52 per cent which would be expected to be the lowest in the sector, with L&VW assuming that this, when considered with the terms of the reinstated Class A debt and wider package, would provide the foundation for a return to an investment grade credit rating. This percentage would rising and stabilise to c.60 per cent. by the end of the AMP, with a target longer term net gearing profile of 65 per cent or less.

Discussions with financial stakeholders in relation to the terms of the recapitalisation are expected to take place in the coming weeks.