Thames Water creditors offer ‘best and final’ rescue funding deal

Thames Water’s creditors have offered a “best and final” offer deal involving new debt and equity in a bid to prevent it from falling into a special administration regime.

Investment behemoths Elliott Management, Silver Point Capital, Invesco, PIMCO and other creditors behind the consortium London & Valley Water have reportedly presented Ofwat, the water regulator, with a “final” package that could prevent Thames Water from collapsing.

According to Sky News, it would involve an addition of nearly £3.4bn in equity as well as around £3.3bn in new debt, with the the company already clogged up by a £20bn debt pile.

Other details in the deal include a commitment to pay hundreds of millions of pounds in fines for pollution and sewage leaks, a small community fund and total spending over the next five years of around £20.5bn.

There would also reportedly be a clause that would lower bills for customers if Thames Water, which serves 16m customers, performs better. The company would also not be sold or listed before 2030 while dividends would also not be paid out during an agreed ‘turnaround’ period.

Creditors in the consortium, which are estimated to be owed around £14bn in total, would write off nearly a third of debt.

A source told Sky News that the deal was a “best and final” pitch by the consortium, though it could be mended pending further consultation and discussions with the government.

Thames Water’s

The deal would come as Thames Water is in a race against time to secure hundreds of millions of pounds in fresh investment by the end of the year.

It would be signed off by the environment secretary Emma Reynolds and other regulatory bodies.

Ofwat is set to be scrapped though the replacement of the regulator with a new framework could take years.

The government has pushed for a private sector-led solution to the crisis at Thames Water, hoping the company is not nationalised or fall into a special administration regime (SAR), which has only been used once for an energy firm in 2021.

FTI Consulting has already been approved to take on contingency planning for an SAR, it has been reported.

The creditors committed around £3bn towards keeping Thames Water running last year while previous investment proposals have been rejected.

An Ofwat spokesperson said: “We continue to engage with London & Valley Water and are reviewing their plans carefully to assess whether they deliver a turnaround in the company’s operational performance and strengthen its financial resilience to the benefit of customers and the environment.”

A spokesman for London & Valley Water declined to comment. The Department for Environment, Food & Rural Affairs did not respond to a request for comment.