Burnham risks £4bn bill in Thames Water special administration
Andy Burnham’s plans to push Thames Water into special administration could leave the taxpayer to foot a £4bn bill.
The incoming Prime Minister is facing a crunch decision over how to deal with the struggling utility and is expected to use a special administration regime (SAR) to keep it running until a buyer is found.
Thames Water has claimed that this unprecedented move could force the government to provide £2bn in extra funding, but a report suggests this figure could more than double.
The government would be required to contribute more than £4.1bn to keep Thames Water afloat over the course of an 18-month SAR, according to a 2024 report by advisory firm Teneo.
Thames Water and its creditors – who are owed £17bn – had been left in the dark ahead of Burnham’s appointment as Labour leader on Friday.
But his plans to place the utility into administration suggest that his team do not believe a private sector-led solution can be found.
Administration could cost £4bn
A consortium of Thames Water’s creditors had hoped as recently as Saturday that they could woo Burnham with a rescue proposal to inject £3.35bn of fresh equity alongside £6.25bn of new borrowing while writing off £9.6bn of existing debt.
The consortium, which includes Apollo Global Management, Elliott Management, Farallon Capital Management and Silver Point Capital, holds roughly £17bn of Thames Water’s £21bn debt pile.
Thames Water has warned that it will run out of money by the end of the year and had claimed it would need at least another £2bn to survive if the creditor deal was refused.
Chris Weston, the utility’s chief executive, told The Sunday Times that the taxpayer would be asked to foot the bill if Burnham’s administration plans go through.
“If they put us into a SAR, the government would have to fund us for the period of time that we were in the SAR,” he said.
A Burnham ally told the Sunday Times: “If it is going to cost the taxpayer £2bn to keep the company afloat then the taxpayer needs to receive something in return; that means control, so that we can fix the company and secure the water supply for thousands of families and businesses.”
Thames Water has funds, for now
The former Mayor of Greater Manchester has pledged to wrestle the nation’s utilities into public hands.
Public control over “the cost of the essentials” is necessary to manage “inflation, public spending and the rest of the economy,” Burnham said in his first speech as Labour leader.
Placing Thames Water into special administration would be an unprecedented move for the new Prime Minister.
The utility does not believe that it needs to be placed into a SAR because it has not breached its terms with Ofwat, the water regulator, and has enough cash for the short term.
A Thames Water spokesperson said: “We continue to work with all parties to reach an agreement that supports Thames Water’s long-term financial stability and ensures the uninterrupted delivery of our biggest infrastructure upgrade in 150 years while continuing to meet the needs of our 16 million customers.”