‘At least a decade’ to turn Thames Water around, CEO says amid £1.6bn loss

The boss of Thames Water has said it will take “at least a decade” to turn the company around as it posted a loss of £1.6bn.

The loss for the year to end March compares to a small profit of £157m the prior year and comes despite an 8.7 per cent rise in turnover during the period to £2.7bn.

The crisis-hit utility has been wrestling with a roughly £18bn debt pile, agreeing a rescue plan with creditors to swerve financial collapse and stave off the threat of nationalisation.

Bosses of the firm were hauled in front of MPs for a second time this year on Tuesday amid accusations of a “lack of transparency.”

Chair Sir Adrian Montague, a City veteran, said he didn’t think there had ever been “another situation like Thames” as he faced questions over a failed rescue deal with KKR and why bonuses were carved out of a £3bn emergency loan.

MPs threatened that the UK’s biggest water supplier could be in “contempt of parliament” if it refused to disclose board minutes with KKR, with Montague responding the company was bound by “confidentiality” and “market abuse” regulations.

Thames’ bosses went on to defend a decision to grant KKR exclusive status in talks and not re-open the bidding process after its withdrawal, despite offers from the likes of CK Infrastructure and Castle Water.

“We had to make a choice. Do we rule out KKR and proceed with bids that are demonstrably inferior and therefore not likely to be in the best interest of the company, or do we agree to the exclusivity and proceed with KKR,” Ian Pearson, chair of Thames Water’s remuneration commitee, said.

The £1.6bn loss figure includes a £1.27bn provision against a loan from its parent company not deemed recoverable, £122m in fines from regulators, £285m of financing costs and £65m of fees to advisers.

Thames Water also said it spent a record £2.2bn in capital investment, which saw the opening of the massive £4.5bn Thames Tideway Tunnel sewer project in May.

Multi-billion rescue deal

Last month, a group of Thames Water’s Class A creditors put forward a sweeping, multibillion-pound rescue deal, while calling for forgiveness of historic fines from Ofwat. 

Chief executive, Chris Weston, told the environment committee bondholders had estimated it could take anywhere from 10 to 15 years to turn around the business.

Major investment firms, including Aberdeen, Elliott Management and Apollo, are among the investors, who hold more than £13bn of Thames’s debt. They have said they have “the funding and experience required to deliver a transformation of the company’s performance which is intended to mark a departure from past failings”.  

A spokesperson for the group said that the deal is “designed to fix the root causes of Thames Water’s problems, restore its balance sheet, rebuild customer trust, and provide the financial investment and operational capabilities to fix the fundamentals of the business once and for all”.

In a plea for a “clean slate”, they have called on the watchdog to write off “several billion” of debt and allow the provider a “regulatory reset”.