Thames Water has said it could be blocked from raising new debt as early as next week, as the struggling water company fights for its survival.
The debt-laden company, which is facing the prospect of a temporary nationalisation if it collapses, has until 7 October to agree an extension to much-needed financing, according to accounts for its holding company.
Under an existing agreement, Thames has access to a revolving credit facility – in effect an overdraft – worth £530m. The facility is due to end next week.
Thames Water Utilities Holdings said the deadline constituted a potential “trigger event” to a scenario where the water supplier would be “prohibited from raising new debt without the consent of its creditors”.
The UK’s largest water supplier is labouring under more than £15bn of debts, creating uncertainty for its 8,000 employees and 16 million customers across London and the Thames Valley.
The deadline is listed as a “material uncertainty” within the accounts, as its auditors, PwC, believe there is doubt over whether the company will exist for a further 12 months given that it currently does not have “sufficient committed liquidity”. Thames only has enough funds, at about £1.6bn, to last until December if lenders do not consent to loan extensions.
Sources familiar with the situation said that the revolving credit facility – which gives businesses flexible access to a pre-approved line of credit – was expected to be “rolled over”. Overall, the group expects to roll over £2.1bn of such facilities before December.
The utility company, which has faced anger over its record on sewage dumping, is in crisis after shareholders U-turned on £500m of emergency funding earlier this year amid a standoff with the industry regulator for England and Wales, Ofwat, over how much Thames will be allowed to increase bills over the next five years.
If the company collapses, it is expected to be put into a form of temporary nationalisation, known as the special administration regime, to ensure its essential services can continue to run while the government examines its long-term options.
A special administration would come at a significant cost to the taxpayer and would represent a major headache for Rachel Reeves, early in her tenure as chancellor.
Ministers are still understood to be hopeful that a “private market solution” can be found where Thames can restructure its finances without government intervention, although officials within the Department for Environment, Food and Rural Affairs and UK Government Investments are monitoring the situation.
Sources said Thames’s creditors were attempting to agree the terms, before the end of the year, of fresh loans to provide “interim liquidity”.
The company is also scrambling to raise £3.25bn to put its finances on a more stable footing and bring new owners into the business. Its ability to secure the funds is expected to be contingent on Ofwat’s “final determination” on the bill increase, expected in December or January.
In the accounts, Thames said it could “revise down” its planned spending “in the event that equity funding were not to be forthcoming”.
A Thames Water spokesperson said: “The reporting of these accounts does not impact the operation of Thames Water, its ownership structure, or its finances. There is no impact on the provision of water and wastewater services to its 16 million customers.
“Our conversations with creditors to extend our liquidity runway continue and we remain focused on securing new equity following the receipt of our final determination.”
