THAMES WATER WARNS OF BANKRUPTCY RISK – The company is locked in a standoff with the water regulator OFWAT
Britain’s largest water company, Thames Water, has warned the government that raising customer bills by more than a third will not be enough to prevent it from going bankrupt. The company is locked in a standoff with the water regulator, OFWAT, after talks broke down over the regulator’s decision to cap bill increases for funding infrastructure investments over the next five years.
Thames Water has argued that Ofwat’s settlement leaves it unable to restructure its debts and remain viable, potentially forcing the government to take the company into public ownership. However, with the company facing annual losses of around £2 billion, Whitehall officials fear that nationalising Thames Water could increase public borrowing or lead to higher consumer costs.
International investors, who currently fund the utility, cautioned the Treasury that a collapse of Thames Water would harm the UK’s attractiveness for infrastructure investment. Such a scenario could undermine the government’s efforts to spur economic growth.
Adding to the concerns, the Treasury is wary that a significant portion of Thames Water’s £16 billion debt could end up on the government’s balance sheet if the company enters special administration. This could further strain public finances and drive up borrowing costs.
