Thames Water will be out of cash for next year in March if it fails to meet the £3bn budget deficit, the troubled utilities company has said.
Britain’s biggest water supplier said on Tuesday that all of its funds would be “exhausted” if it failed to meet demand for funds and that critical environmental projects were to worsen.
The company’s heavy debt will run out of cash by the spring of 2025 without £3bn in extra cash from its creditors, and the nation could be temporarily at risk.
The company reported a 40% increase in the number of pollution incidents in the six months to 30 September. The Thames reported 359 category one to three pollution incidents in the six months to 30 September, blaming the particularly wet spring and summer.
Industry faced outcry over garbage balls in UK seas and rivers. Thames Water’s chief executive, Chris Weston, said that after “record rainfall and groundwater in our region, pollution and overflows are unfortunately on the rise”.
Thames faces two critical court dates, on December 17 and January 20, to test the money – referred to as an extension of liquidity – which some lenders have already agreed to lend.
Weston asked staff to justify the receipt of £770,000 worth of £70,000 in criticism despite the regulators, including consumer bills and problems arising in the company’s environmental performance.
He said: “We need to attract talent to this company. We operate in a competitive market. And if we don’t offer competitive packages, they won’t come to Thames and work and they won’t solve the problem.”
Weston took the job in January and received a 195,000 bonus for the first three months from the company.
On Tuesday, Thames said that debt for the operating company had grown to £15.8bn in the half-year, from £14.7bn the same year earlier. However, its overall debt is likely to be higher – it predicted its total debt cap was more than £19bn.
The cash update comes at a critical time for the company, which supplies 16 million customers across London and the Thames Valley and needs billions of pounds to maintain its critical water and waste treatment services.
If the court and creditors approve, then the proposed deal will give Thames enough funds to last until October of the following year. Thames is also looking to raise 3.25bn in new equity to fund investments until 2030.
Thames said he had “enough cash to meet” [its] Charges that occur until before the end of March 2025 and any delay in implementing the liquidity extension of the transaction could result in that money being exhausted “before it is implemented”.
The funding update comes amid growing public outrage over water companies’ environmental impact.
Aegidius Bristow, chief executive of the surface pressure group Against Sewage, said: “However, a further apology from Thames Water, for yet another time of poor sewage results. What do customers have to pay for? This is the first example of the urgent need to fundamentally reform England’s broken water regime.”
Tim Farron, environment spokesman for the Liberal Democrats, said in response to the increase in pollution incidents: “This slow rise in sewage overflows must be the last straw for Thames Water. The government needs to invest in a dedicated management firm to give customers the fairness they deserve.”
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Weston and its chief economist, Alastair Cochran, said efforts to turn the financial results around the Thames Water would bring economic benefits.
Weston said: “Today’s news shows further development to put Thames Water on a more financially stable footing as we seek long-term financial resilience.
“We have reached key milestones to establish a more stable financial platform, adequate liquidity for the extension of the transaction objective and to advance the development of our equity process.”
Investors have also expressed interest in getting a new lease on the business, which is needed for their funds in the longer term. However, they are still trying to find out what will happen to the besieged company, the UK government and the water regulator, Ofwat, if they provide billions in new equity funding.
Coval Capitala UK infrastructure investor is reported to be interested in the Thames government with the French water project of the Suezian contractor. It provided a cash injection of £1bn upfront with a further £4bn paying off and selling shares in Thames as it listed its remaining operations.
Other potential buyers include Hong Kong-based company CK Infrastructure Holdings, which already owns Northumbrian Water and Castle Water.
Thames Water posted underlying first-half profits of £715m, up 14%.
Ofwat is due to announce on December 19 how much water companies in England and Wales, including Thames, can charge customers through bills over the next five years. Thames wants to increase the bill by 52%.