The Memo: High Court to decide on Thames Water's £3 billion 'company plan'

Thames Water, Britain’s largest water supplier with 16 million customers, is at the heart of another debate over the renationalisation of industries across the UK. The ongoing court hearing will decide whether to approve the firm’s ‘company plan,' which would keep Thames Water afloat until 2026 with £3 billion in emergency funding. However, a collection of MPs and charities are arguing that Thames Water should instead be placed into government-handled administration. This special administration would likely result in government ministers running the company through an ‘arms-length’ body. It might also mean that the public will have to pay off Thames Water’s debt. However, consumer bills probably wouldn’t change anytime soon, as they are set by the regulator Ofwat. 

Thames Water and groups of rival creditors are presenting their cases before a High Court judge who will then decide whether to approve the funding, which would then prevent the temporary nationalisation of the company through special administration. Thames Water says it could run out of money by March if the rescue is not approved. The company currently has at least £15 billion in debt due to years of heavy borrowing while still paying dividends to shareholders. 

Thames Water believes its plan will be successful as it has the backing of creditors holding over 90% of its secured debt, despite opposition from a group of lower-ranked creditors who claim their plan would provide the same funding on better terms. The judge has to decide whether the dissenting creditors will be worse off if the company goes into special administration (the most likely alternative). These lower-ranked creditors have proposed an alternative package, arguing that the other plan unfairly favours senior creditors, especially considering the steep 9.75% interest rate. 

The hearing comes at a time when public dissatisfaction with water companies is high. Later this year, customers across the UK will once again see a spike in their water bills. In London, Thames Water’s customers will pay 35% more than before, but Southern Water customers will see the greatest price hike at 47%. Groups campaigning for nationalisation argue that the price increase will go towards servicing the new debt rather than providing clean drinking water. At the same time, the water industry continues to discharge sewage into rivers and seas, leading to accusations that water companies are prioritising their profits over the environment. It’s also worth noting that Thames Water is paying out £15 million per month to professional advisors, most of whom are lawyers. In summary, it could cost the company £120 million in total to procure the loan and its ongoing restructuring costs amount to more than £200 million. 

Charlie Maynard, Liberal Democrat MP for Witney in Oxfordshire, is leading a group of clean river campaigners who have made a written submission to the court. Maynard has the support of 34 clean river groups, 28 parish councils and other MPs in the area served by Thames Water. In the submission, Maynard says he opposes the restructuring plan in the interests of the company’s customers. He has suggested that the financial plan would not be sustainable as it does not make appropriate provisions for Thames Water to meet its legal obligations to provide water and sewage services without polluting rivers and seas. Maynard claims that customers will be paying off the interest on the loan if the rescue funding is approved. Meanwhile, Thames Water management has promised the cost will not be passed on to customers.