Ofwat boss fails to rule out more supplier woes after Thames Water troubles
Water suppliers will not be allowed to rack up debts and underinvest again following Thames Water’s financial troubles, the boss of industry watchdog Ofwat vowed yesterday.
Chief executive David Black told the House of Lords yesterday that it can now “stop dividends” and “lock cash coming out of companies” if water firms are not in robust financial shape.
However, he stopped short of ruling out further suppliers reporting financial troubles in an industry weighed down by a £65bn debt pile – with Thames Water just one of multiple water companies burdened with debt.
“We have got the safeguards to stop the cash moving out of companies [but] clearly, we’ve got companies in positions that do require injections of equity. We still have the legacy of those past issues to address,” Black admitted. Thames Water, he said, required “substantial sums of money” to get its house in order.
Black told the industry regulators committee that Ofwat “should have stepped in to stop companies gearing up” with debts as early as 2007 – when Kemble Holdings, a consortium then led by Australian finance giant Macquarie snapped up Thames Water in an £8bn deal – but that the regulator lacked the power to do so.
Ofwat, which has been criticised for being too cosy with the industry, said it now had more of a mandate to questions suppliers over debt levels.
Numerous industry execs, including the new co-CEO of Thames Water, previously worked at the regulator.
Black admitted that “regulators across all sectors took a relatively hands-off approach to gearing up companies”, including also the energy sector – which has suffered its own domestic crisis.
Ofwat’s attendance at a Westminster committee session comes amid escalating chaos at the UK’s largest supplier Thames Water, which is home to 15m customers across London and south east England.
Thames Water announced a boardroom exodus last week, with chief executive Sarah Bentley abruptly stepping down, followed by chairman Ian Marchant.
It is struggling to tame a £14bn debt pile and is scrambling for £1bn in funds from stakeholders to stop the company falling into administration, with the supplier well behind on its turnaround plans as it battles with sewage leaks and overspills.
Thames Water was hit with yet another fine yesterday – a £3.3m levy handed down after undiluted sewage was pumped into rivers near Gatwick Airport six years ago. The firm has been fined more than £35m for pollution incidents between 2017 and 2023.