The situation at Thames Water will be examined by the Environment Food and Rural Affairs Committee this morning at 9.15am when it questions the responsible government minister, and the Chief Executives from the company and water sector regulator Ofwat.
In late June both the Chair and the Chief Executive Officer of Thames Water were replaced amid media reports that the company faced a financial crisis and the government was contemplating emergency measures.
At the same time Thames Water has been criticised for pumping sewage into rivers, failing to invest enough in its infrastructure and making large dividend payments to its shareholders. The company has also been criticised for paying its executives salaries that have been described by the Environmental Audit Committee as “excessive”.
The Committee’s evidence session is aimed at clarifying what is going on. However, it appears that the financial crisis is characterised by Thames Water having £14 billion worth of debt. This means it has one of the highest levels of debt, relative to its assets, of any UK water company - a ratio much higher than the regulator recommends. This debt is also set to increase because much of it is inflation-linked.
It is not clear if the company has the cash to service its debts. This is partly because the finances of Thames Water appear to have been organised in such a way that its interest payments are set to be paid through its own dividends – but these dividends will not necessarily be forthcoming.
As well as seeking to clarify the situation at Thames Water, the EFRA Committee will ask about the performance of the wider water sector and its impact on consumers. Between 1991 – shortly after water companies in the UK were privatised – and 2021, the 11 companies in England and Wales paid over £50 billion in dividends to their shareholders. Six of the 11 are owned or controlled by overseas investors.
Two Chairs of other committees will be attending the session and will be free to participate as they wish – Philip Dunne MP, Chair of the Environmental Audit Committee, and Darren Jones MP, Chair of the Business and Trade Committee.
Witnesses:
Panel 1 (9.15am):
Sir Adrian Montague, Chair, Thames Water
Alastair Cochran, joint interim CEO, Thames Water
Cathryn Ross, joint interim CEO, Thames Water
Panel 2 (c. 10.00am):
Iain Coucher, Chair, Water Services Regulation Authority (Ofwat)
David Black, CEO, Ofwat
Panel 3 (c.10.45am):
Rebecca Pow MP, Minister for Environmental Quality and Resilience at the Department for Environment, Food and Rural Affairs (Defra)David Hill, Director-General, Environment Rural and Marine, Defra
Click here to watch the evidence session live
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