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Defra responds to Thames Water crisis

Following media coverage detailing that investors in Thames Water have declined £500m of emergency funding amid a standoff with the industry regulator over attempts to raise bills, Defra has responded.

Thames Water is Britain’s biggest water company and has been lobbying the regulator, Ofwat, to increase bills by 40%, pay lower fines for breaches, and keep paying out dividends. The failure to secure the investment increases the possibility that Thames Water could be placed into special administration, which would result in the government stepping in and temporarily renationalising the company.

Defra reports that this is a matter for the company, which has said it continues to work with its shareholders and has a liquidity position of £2.4bn.

Ofwat monitors the financial position of all water companies, ensuring they take action when long term financial resilience needs to be strengthened

Defra continues to say, “Within government we always prepare for a range of scenarios across our regulated industries, including water, and remain in close contact with Ofwat.”

A government spokesperson said: 

Like any company needing to secure new investment there are a wide range of options available to water companies, including the injection of new equity from any prospective investors.

Ofwat, as the financial regulator of the water sector, continues to engage with Thames Water to improve its financial resilience.

We prepare for a range of scenarios across our regulated industries – including water – as any responsible government would.

An Ofwat spokesperson said: 

Safeguards are in place to ensure that services to customers are protected regardless of issues faced by shareholders of Thames Water.

Today’s update from Thames Water means the company must now pursue all options to seek further equity for the business to turn around the performance of the company for customers. Thames Water is a business with a regulatory capital value of £19 billion, with £2.4 billion of liquidity available, and an annual regulated revenue of £2billon and new leadership team.

Ofwat’s PR24 price control will put customer and environmental priorities at the heart of the water sector. In order to drive this change, we need to ensure that the sector attracts investment and is fair to bill payers. Since 2020 nearly £4.6 billion new equity has been injected into the sector. We will set out our draft determinations in June this year.

We also need to see companies deliver the performance that customers expect and that they are run in a way that meets customers’ expectations.

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