Key facts
- MPs are urging ministers to reject a £10 billion rescue plan for Thames Water from a consortium of US hedge funds.
- The MPs believe the creditors' proposal prioritizes extracting immediate value over the long-term success of the utility and the environment.
- Thames Water faces running out of funds by the end of the year, with debts exceeding £20 billion.
- The Environment, Food and Rural Affairs Committee chairman, Alistair Carmichael, called for legal reforms to strengthen the Special Administration Regime for earlier government intervention.
- The London & Valley Water consortium claims its plan will write off billions of debt and provide £10 billion of new capital.
- Creditors are seeking leniency on environmental fines, potentially worth up to £1 billion.
A cross-party group of UK Members of Parliament has urged ministers to abandon negotiations with US hedge funds over the future of Thames Water, a company burdened by £20 billion in debt and effectively managed by a consortium of 100 hedge funds and distressed-debt investors. The MPs, in a report, called for ministers to consider emergency legislation to seize control of the company's financial affairs to stabilize it.
Alistair Carmichael, chair of the Environment, Food and Rural Affairs Committee (Efra), expressed disbelief that a special administration regime (SAR) for failing water companies could not be invoked for Thames Water based on its performance alone. The report suggests Ofwat and the government should withdraw from negotiating with the consortium.
The report criticized the consortium, stating they lack the necessary expertise for a vital public service and operate opaquely, seeking relief from environmental penalties while profiting from debt interest. Carmichael noted that Thames Water's 16 million customers have lost faith due to polluted waterways, rising bills, and low water supplies.
The London & Valley Water consortium, representing the creditors, is seeking to restructure Thames Water in a multibillion-pound deal. They are requesting leniency on environmental fines, potentially worth up to £1 billion, related to pollution, leakage, and other performance targets. MPs stated that these demands indicate a lack of prioritization for the company's much-needed performance turnaround, with creditors profiting from prolonged negotiations.
A spokesperson for London & Valley Water asserted that their enhanced proposal addresses feedback and offers the quickest route to resolving Thames Water's issues. They claim the plan includes writing off billions in debt, securing an investment-grade rating, and injecting £10 billion of new capital for infrastructure improvements and river cleanup. The consortium stated all fines would be paid, profits reinvested, and no dividends taken until the company is turned around, with no cost to the government or taxpayers and protected customer costs.