(Dec 3): Thames Water reported ballooning debt as creditors press on with talks to thrash out a rescue deal for the beleaguered utility.
Net debt swelled 12% year-on-year to £17.6 billion after the company accessed more of a £1.5 billion emergency loan it got from creditors in March. It shows the balance sheet is worsening while negotiations continue with regulator Ofwat over the terms of a restructuring plan.
The UK’s largest water utility has effectively been in the hands of creditors since shareholders walked away last year. It’s being funded by the emergency loan, and had drawn £1.43 billion of the facility as of September, according to a statement on Wednesday. It’ll have to seek lenders’ consent before accessing more next year.
“Our balance sheet remains weak, hence the focus on recapitalising the business,” the company said in the statement.
Thames has suffered a calamitous few years, weighed down by debt and suffering widespread criticism for its poor environmental record, which has landed it with hefty fines. Ofwat signed off on bill hikes for water companies late last year, bringing much-needed funds for investment but fuelling public outrage.
Thames said on Wednesday that increases in bills, which kicked in last April, underpinned significant earnings growth in the fiscal first half, but that customer complaints surged by 74% as households balked at paying more.
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The utility company’s mounting debt underscores the urgency for the creditor group — which includes the likes of Apollo Global Management, Elliott Management and Silver Point Capital — to reach a restructuring deal with Ofwat.
Thames’s gearing — the ratio of a company’s net debt to its regulatory capital base — has increased to 85.9%, according to the statement. The firm needs equity to lower this to the 55% allowed by Ofwat to help improve its credit rating.
The UK said earlier this year it will abolish Ofwat and set up a new watchdog with stronger powers to oversee the troubled industry, following an independent review by former Bank of England deputy governor Jon Cunliffe.
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Thames said on Wednesday there needs to be regulatory reform for the sector to make long-term progress.
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