Britain’s biggest water supplier must not “hit consumers” to prop up its finances and avoid nationalisation, the government has said after the company asked to increase bills by 40 per cent.
Thames Water wants to raise bills from an average of £436 to £609 a year by the end of the decade and be spared fines for polluting, after investors refused to put in an extra £500 million.
The company is now at the centre of a battle over who pays for upgrades to the system that covers 15 million households. Investors refused to put in more money unless bills rose dramatically.
Michael Gove, the communities secretary, called Thames Water’s leadership “a disgrace”. He said: “For years we have seen customers of Thames Water taken advantage of by successive management teams that have been taking out profits and not investing as they should have been.”
Gove said the company’s leaders “haven’t changed their ways” despite years of warnings, adding: “I have zero sympathy for the leadership of Thames Water. In my own constituency I have seen how they have behaved in a high-handed and arrogant way towards the consumers who pay their bills.
“So the answer is not to hit the consumers, the answer is for the management team to look to their own approach and ask why they are in this situation, and of course the answer is because of serial mismanagement for which they must carry the can.”
Chris Weston, Thames Water’s chief executive, insisted that much higher bills were “the price customers have to pay for the investment in our infrastructure that’s needed”. The company is pressing Ofwat, the regulator, to allow the increase as shareholders said a refusal made the highly indebted utility “uninvestable”. The stand-off raises the prospect of nationalisation and big losses for shareholders.
For more than a year The Times Clean It Up campaign has been urging Thames Water and other companies to invest more to tackle sewage pollution.
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Sir Jacob Rees-Mogg, the former business secretary, said: “Thames Water ought to be allowed to go bankrupt. It would continue to be run by an administrator, the shareholders would lose their equity but they took too much cash out so deserve no sympathy.”
Jeremy Hunt, the chancellor, said the company was “still solvent” and supplies would not be interrupted, adding that he was monitoring the situation “very carefully”.
Weston, 60, who was brought in as chief executive in January, becoming the company’s fifth leader in eight years, said it had £2.7 billion of cash and access to overdrafts, enough for it to continue operating until May 2025.
The nine shareholders of Thames Water, which is £18 billion in debt, are led by Omers, a Canadian pension fund. They also include the sovereign wealth funds of China and Abu Dhabi and the retirement schemes of university academics and former BT staff.
Thames Water’s proposed 39.7 per cent increase in bills is second only to Southern Water’s planned 66 per cent increase between 2025 and 2030. The average for the sector is a 31 per cent.
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The growing financial crisis at Britain’s largest privatised water company has raised the prospect that it may have to go through a huge debt-for-equity swap, wiping out its existing shareholders; that it could slide into a special administration regime; or that the business could be nationalised. Ministers are said to have drawn up contingency plans named Project Timber.
At the end of May Ofwat is due to publish its draft determination on Thames Water’s business plan, which would raise bills by 40 per cent. Weston said it would be at that point that shareholders would have clarity.
Thames Water had the biggest relative increase in sewage spills of any water company last year, with the number of discharges into rivers and seas up by 112 per cent.
