Key facts
- MPs are urging ministers to break off talks with US hedge funds over Thames Water.
- The company has debts of £20bn and is controlled by a group of 100 hedge funds and distressed-debt investors.
- MPs believe ministers should consider emergency legislation to take control of Thames Water's financial affairs.
- The chair of the environment, food and rural affairs committee (Efra), Alistair Carmichael, said a special administration regime (SAR) cannot be triggered on performance grounds alone.
- The report suggests Ofwat and the government should withdraw from negotiating with the consortium.
- The London & Valley Water consortium claims its plan will write off billions of debt and provide £10bn of new capital.
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. Environment Secretary Angela Eagle suggested that the current law prevents an SAR because the US hedge funds holding the debt have maintained operations while seeking to renegotiate liabilities.
The report criticized the consortium of distressed-debt specialists, 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, likening the creditors' actions to "joy-riding in the family car."
MPs recommended exploring alternatives like SAR or new legislation to resolve the situation and stabilize the sector, potentially through a new buyer. Carmichael suggested that placing the company into special administration once its funds are depleted could reset its fortunes, with potential short-term government liabilities offset by a future sale.
This intervention follows a debate among 64 MPs on a petition advocating for the renationalization of the privatized water industry. The Efra committee raised concerns about the regulatory due diligence on the US-led consortium, which includes Elliott Investment Management, Silver Point Capital, BlackRock, and M&G. Elliott's founder, Paul Singer, is a notable Trump donor.
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. They also mentioned a new board with specialist expertise would oversee the transformation, and that the investor group has never controlled the company or received dividends, having stepped in to fund a revenue shortfall.