Thames Water agrees fee plan for £123m sewage and dividend fines

Thames Water has agreed a fee plan with the trade regulator for fines it owes value £123m, because it races to safe funding to keep away from non permanent nationalisation.

The utility firm, which serves 16 million prospects throughout London and the south-east, is attempting to tug collectively a deal to keep away from collapse.

The debt-laden utility firm was hit with a file £104m advantageous by Ofwat in Could over environmental breaches involving sewage spills, after failing to function and handle its therapy works and wastewater networks successfully.

On the similar time, an extra £18.2m advantageous was levied on Thames for breaking dividend guidelines, the primary penalty of its sort within the water trade. Ofwat mentioned the corporate had paid out money to buyers regardless of having fallen quick in its providers to prospects and its environmental file.

The penalties have been initially resulting from be paid by 20 August however the regulator has given the corporate some respiration area to pay the fines.

Thames Water has been attempting to lift cash for a turnaround plan for the previous yr, after build up a internet debt pile value £17.7bn below successive non-public homeowners.

The corporate gained court docket approval in February for a debt package deal of as much as £3bn to fund it by way of this yr, however it should increase billions of kilos extra in new fairness to attempt to repair its leaking pipes and malfunctioning therapy works.

Thames Water’s senior collectors have management of the enterprise after shareholders wrote down the worth of their stakes to zero. The collectors have provided a £5bn package deal of fairness and new debt, whereas writing off between 20% and 30% of the present debt.

Nevertheless, negotiations over the fairness funding have stalled partially due to the issue of fines. The collectors have insisted that Ofwat should grant regulatory leniency to cut back the long run burden of fines. With out investing, Thames Water is predicted to proceed to rack up fines.

Talks between the collectors and Ofwat have progressed slowly all through the summer season, though one particular person concerned within the course of advised that the phrases could possibly be agreed in September, for signoff in October.

But any proposals for regulatory easement would require authorities approval. The atmosphere secretary, Steve Reed, instructed parliament in June that the federal government would reject any “regulatory easements”, and that he was stepping up preparations for particular administration, which might in impact equate to a short lived nationalisation.

The standoff has meant that even folks near the funding course of have little thought of whether or not the federal government will take management or not. The federal government has engaged the advisory agency FTI Consulting to have a look at the choices, together with particular administration.

The federal government can also be planning to abolish Ofwat, which may complicate issues additional, whereas rival water corporations may additionally take into account authorized motion if Thames is granted a beneficial deal not accessible to them.

Ofwat had beforehand instructed Thames that every one penalties for environmental breaches and dividend funds needed to be “paid by the company and its investors, and not by customers”.

Whereas the fundraising is ongoing, the regulator has accepted Thames’s request for a fee plan, which can end in it paying £24.5m, or 20% of the penalties, by the top of September, with the remaining to be paid later.

The corporate pays the rest on the earliest of three doable dates, which might be both 30 days after the implementation of a restructuring plan or, if Thames enters particular administration, the steadiness can be due 30 days after the top of that course of. The ultimate deadline for fee of the advantageous shall be 31 March 2030.

Lynn Parker, senior director of enforcement at Ofwat, mentioned: “This payment plan continues to hold Thames Water to account for their failures but also recognises the ongoing equity raise and recapitalisation process.”

Thames mentioned it “continues to work closely with stakeholders to secure a market-led recapitalisation which delivers for customers and the environment as soon as practicable”.

The corporate mentioned the penalties “will not be funded by customer bills”.