Experts have cautioned that Thames Water could seek additional bill increases if it is unable to repay the £3bn loan within its two-and-a-half-year term.

Facing a £16bn debt load, the UK’s largest water company cautioned in September that it could run out of cash by December. In October, the company revealed it had obtained a £3bn loan from its main creditors, providing an extra year of financial breathing room.

In an article published in The i Paper on 14/12/24, Tim Whittaker, Research Director at EDHEC Infrastructure & Private Assets Research Institute, said:

“The 9.75 per cent interest rate on the loan, as well as fees and premiums paid to lenders to incentivize them to sign up to the scheme, will cost Thames Water a further £800 million, bringing the total cost of its bailout up to £3.8bn.”

He further commented:

“Without accounting for Thames Water’s individual circumstances, Ofwat’s pricing strategy risks running the firm into “guaranteed administration”.

“Ofwat would claim that despite this loan charging significantly higher interest than what Thames Water pays on its other debt, it will not impact on customer bills. This is true, the higher interest won’t move the revenue calculations, but that’s viewing the firm as some abstract [entity]”.

“In truth Thames has multiple calls on its cash – paying the debt holders, investing in its network, etc., and very little sources for it (either through borrowing or issuing equity or making a profit – I’m ignoring selling assets here)”.

“As a result, to pay the higher interest it needs to sweat its assets better, not invest, or ration funds from other areas. This is likely to result in poor operating performance or guaranteed administration – in my view, both.”

🔗 Read the full article.

🔗 Consult our research paper, “Low Tide: What the Data Showed About Thames Water”.