This article discusses how Ofwat, the UK water regulator, has made it harder for Thames Water to secure its financial future by imposing stricter conditions. Thames Water secured a 35% rate increase over five years, lower than its requested 52%. This increase will result in an average return on equity of 5.1% by 2030, at the lower end of the range of 4.97% to 6.28% hoped for by management last August. This could jeopardise the success of the non-binding offers recently made to the company, which seeks to bring in new shareholders to its capital.

Tim Whittaker, Research Director at EDHEC Infra & Private Assets, commented:

“Je ne pense pas qu’un nouvel investisseur soit prêt à renforcer les fonds propres de la société en échange d’un tel rendement, environ 11% seraient exigés“.

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“I don’t think a new investor would be willing to strengthen the company’s equity in exchange for such a return, around 11% would be required.”

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