The House of Commons Environment Food and Rural Affairs Committee has published the timetable for tomorrow’s evidence session with Thames Water and Ofwat.
The Interim Co-Chief Executive Officers of Thames Water have been asked to return to give evidence in person to the Committee to answer MPs’ questions on Thames Water’s financial arrangements, in light of a recent report in the Financial Times surrounding the firm’s finances.
The Committee will also question Ofwat’s CEO, David Black, and the regulator’s Chair, Iain Coucher.
The cross-party Committee will seek clarification on evidence submitted by witnesses in a hearing in July, in which MPs were told that the company’s shareholders had provided £500 million of equity.
The Committee said:
“While the joint interim CEOs and the Chair of Thames Water have written to the EFRA Committee Chair on this matter, the Committee is keen to interrogate the full nature of this financing. MPs will also attempt to shed light on the future financial viability of Thames Water.“
Joint CEOs - “TWUL received £500 million in cash from its existing external shareholders with no obligation to repay this money”
Joint Interim Co-CEOs at Thames Water Alastair Cochran and Cathryn Ross wrote to the Committee on 2nd December in response to an article in the Financial Times on 1st December headlined ‘Thames Water owners pile group with debt’ to “correct any misunderstanding that may follow from the article.”
The Co-Chiefs explained that the implication of the article that the £500 million of equity funding received by the regulated company in March 2023 represented an increase in the debt of the company was “incorrect and misleading.”
The letter says that in March 2023 the external shareholders loaned £500 million to Kemble Water Holdings and that the funds were eventually received by the Thames Water Utilities Ltd (TWUL) ring-fenced group “which is what matters” – as equity. According to the CEOs, as the funds were “provided by our external shareholders not third parties”, TWUL “has no obligation in respect of this loan therefore it does not increase the debt burden of TWUL.”
“TWUL therefore received £500 million in cash from its existing external shareholders with no obligation to repay this money”, the letter states. In addition, the flow of funds would be “well understood by the debt investors (mainly UK pension and insurance companies) in TWUL and it was therefore “extremely unlikely” that they would have concerns.
Sir Adrian Montague, CBE Chairman: “Perhaps I can also explain why accounts of Kemble Water Holdings Ltd have received a material uncertainty qualification"
Sir Adrian Montague, CBE Chairman subsequently wrote separately to the Committee on 5th December to endorse the explanation laid out by the CEOs.
He also went on to provide further clarification with regard to a material uncertainty qualification in the accounts for Thames’ parent company Kemble Water Holdings Ltd flagged up by auditors PwC, commenting:
“Perhaps I can also explain why the accounts of Kemble Water Holdings Ltd have received a material uncertainty qualification (as they did in July 2023) but those of Thames Water Utilities Ltd that we published this morning have not. The situations of the two companies are different and need to be considered individually, and this has influenced the auditors’ judgement regarding material uncertainty. Kemble Water Holdings is subject to that qualification because there are as yet no settled plans to refinance a £190m loan that falls due in April 2024; in contrast, Thames Water Utilities – the ringfenced, regulated entity - has liquidity in the form of cash and undrawn facilities sufficient to last at least 12 months."
“I hope you will not mind me following up so quickly on the letter sent on Saturday given the necessity of being absolutely clear regarding this issue,” the letter concludes.
The timetable for tomorrow’s evidence session is as follows:
From 14.30 on Tuesday 12 December in Committee Room 6, Palace of Westminster:
- Alastair Cochran, Interim Co-CEO at Thames Water
- Cathryn Ross, Interim Co-CEO at Thames Water
- Sir Adrian Montague CBE, Chair of Thames Water
From approx. 15.30:
- David Black, CEO at Ofwat
- Iain Coucher, Chair of Ofwat
Click here to watch the evidence session live on Parliamentlive.tv when the hearing begins tomorrow.