Crisis-hit water company plans 56% hike in bills
BELEAGUERED Thames Water is pushing for the right to increase charges by 56 per cent in a move that would raise customers’ average annual bills to almost £700.
Bosses have put the proposed hike, which would be introduced over a five-year period, to regulators in a bid to stave off the company’s collapse.
Investors in the troubled firm have refused to come up with a cash injection needed to ensure its long-term survival, triggering demands that it should be nationalised. But this could see as much as £15billion of debt effectively being landed on taxpayers.
As an alternative, Thames Water is understood to have submitted a new business plan to the industry regulator Ofwat. Initially, Thames proposed a 40 per cent increase, taking its annual revenues to £2.8billion and lifting average bills to more than £600.
But it has now put out a begging bowl to ask watchdogs to sanction a 56 per cent hike.
Although Thames Water has built up £18billion in debt, it still has access to £2.5billion in cash and bank credit – enough to see it through to the summer of 2025.
Industry analysts have accused investors of treating the company as a cash machine since privatisation 35 years ago. They have taken out billions in profits and dividends, while loading the business with vast debts. Separately, a succession of failing executives have pocketed lotterystyle windfalls in pay and perks.
Despite years of inflation-busting bill increases, the company continues to fail to meet targets to deal with leaks from its pipes. It has also been repeatedly fined for polluting waterways.
It was plunged into crisis last month when its nine shareholders refused to pump any more financial support into the firm.
Those shareholders, including Canadian pension fund Omers and the sovereign wealth funds of China and Abu Dhabi, had committed £3.75billion through to 2030. They injected £500million last year and were due to put in a further £500million this spring.
Subsequently, the investors withdrew all support, declaring Thames Water ‘uninvestable’.
Ofwat will announce a decision in June on whether to allow the 56 per cent rise. In the meantime, the government is drawing up a nationalisation plan, codenamed Project Timber, in the event that Britain’s largest water firm fails.
Nationalisation would mean lenders could lose around £3billion, while some investors would see the value of their stake marked down by 35-40 per cent.
A government spokesman said: ‘We prepare for a range of scenarios across our regulated industries – including water – as the public would expect.’
Thames Water said it is involved in seeking more investment.