Rachel Reeves tells creditors to resolve Thames Water crisis
Rachel Reeves has called for a “market-based solution” to be found at Thames Water before the company is put into special administration.
The Chancellor reportedly sent a letter to creditors of Thames Water to state that any solution must result in a “successful turnaround”.
Her letter came after environment secretary Steve Reed said the government was preparing for eventualities including a special administration regime (SAR), with the UK’s largest water company struggling to manage a £20bn debt pile.
It has been reported that FTI Consulting is the frontrunner to advise on contingency plans if the company were to be wound up.
SARs are a unique type of administration for essential services. It was used when the power company Bulb Energy collapsed in order for some 1.5m customers to be protected.
In her letter, Reeves wrote: “The government recognises the seriousness of the situation facing Thames Water.
“Our position remains that the company should find a sustainable, market-based solution to the current situation.
“This solution must not only secure the company’s long-term financial stability but also deliver a successful turnaround that achieves positive outcomes for customers and the environment.”
She also said the government was “prepared for all eventualities” and had taken “detailed contingency planning”.
Thames Water’s crunch talks
Among the creditors involved in talks with the regulator Ofwat and government officials over a takeover deal include the Royal Bank of Canada, the fixed income investor Pimco, the asset management company Apollo and hedge funds Elliott and Silver Point, according to The Times.
The creditors are reportedly drawing up plans for a board to be chaired by Mike McTighe, the chairman of the telecoms group OpenReach.
Some £3bn in fresh equity would be added to Thames Water while £2.25bn in new debt woul be issued, reports suggested.
The deal would also include a £3.2bn writedown on senior debt and a total write-off for junior debt holders.
It would come as Thames Water agreed a payment plan for a £122.7m fine over sewage spills and shareholder payouts.
Over £25m of the total fine will be paid by Thames Water while the remainder will be paid by the end of March 2030.