Thames Water faces fresh threat to survival after pensions regulation breach
Thames Water is facing a fresh threat to its survival after breaching pensions regulations, opening up the possibility of a costly probe.
The Reading-based business, which could run out of cash as soon as December, missed a statutory deadline at the end of June to value its company pension scheme and is now facing a potential investigation from the Pensions Regulator (TPR).
The defined benefit scheme, which is no longer offered to current employees, has more than £1bn in assets and is paid out to thousands of retired staff.
In a statement, Thames Water said any investigation or litigation by TPR “could place restraints on the financial resources available to [Thames Water] – and consequently the timeline available to complete the recapitalisation – potential returns to equity investors and further affect the investibility and financeability” of the company.
Failure to value the scheme’s assets by the statutory deadline can trigger an investigation by the Pensions Regulator (TPR) and lead to enforcement action.
The breach comes as another blow to Thames Water as it fights for its survival to stave off nationalisation and keep on top of a near-£20bn debt pile.
The troubled water firm – which serves around 16m customers, mostly in London and the South East – said in its latest financial report in July that it has £515m in cash, plus access to another £750 million in backup funding if needed. But Thames confirmed this is only expected to last until some time in the fourth quarter of the year, meaning it will run out of liquidity by the end of 2026.
A TPR spokesperson said: “We are liaising with scheme trustees in our role to protect members’ pensions but are unable to comment further.”
A Thames Water spokesperson said: “The Pensions Regulator has been informed that Thames Water and the trustees of the Thames Water Pension Scheme have not yet reached agreement on the scheme’s latest triennial valuation within the statutory timeframe.
“We remain in open and constructive dialogue with the trustees and the regulator, with the interests of scheme members our priority.”
Thames Water added that it had not been notified of any investigation having been opened by the regulator.
The valuation for a separate Thames Water scheme, known as the Thames Water Mirror Image Pension Scheme, was completed by the statutory deadline.
Government rejected Thames Water rescue deal
Environment secretary Emma Reynolds last month rejected a rescue deal proposed by lenders that would provide some £3.4bn in equity investment and £6.5bn in debt financing.
Morning Wire revealed in July that Reynolds had never met with the investors behind the deal, that include financial giants Apollo, Silverpoint Capital and Elliott Management, before dismissing it.
Reynolds raised concern in a letter to Ofwat that the deal offered may not leave water and wastewater systems “adequately protected”.
The utilities firm has been on the brink of a special administration regime (SAR), which would see it nationalised on a temporary basis.