Performance woes hamper Thames’ equity hopes

The conditions attached to Thames Water’s £1.5 billion equity injection by shareholders are understood to have been breached, putting the additional £1 billion at risk.

A year ago, shareholders committed £1.5 billion to improve infrastructure and services at the ailing company.

After the initial £500 million was drawn, a further £1 billion of additional equity  was “unanimously approved by shareholders”.

An Equity Support Letter set out various conditions that the drawdown of the remaining £1 billion would be subject to. These included performance conditions, a qualitative assessment of the PR24 submission and continuity of the leadership team at the time of each drawdown.

While Bentley’s departure would put the organisation in breach of the leadership condition, it is understood that the board has concerns around Thames’ performance also.

Chief executive of Ofwat, David Black, told a House of Lords inquiry that shareholder faith in Thames’ turnaround was wavering.

He said the company was revising its turnaround plan amid growing concerns about the successful turnaround of the company.

Black said: “From the investor perspective they are looking to invest in a proposition that gives confidence that a turnaround plan is in place.”

The company’s interim chief executive duo, Alastair Cochran and Cathryn Ross, confirmed the company has access to more than £4 billion.

Black said the company was engaged with the regulator on an ongoing basis, and its concerns were not fresh. He told peers that while Ofwat has “a strong interest”, as a private company it was “ultimately down to the company”.

On whether an extra £1 billion would be sufficient to bolster Thames’ position, Black said Ofwat needed to see the plan to make a judgement, but said it would need “substantial amounts”.

Ofwat chair Ian Coucher underlined that Ofwat had expressed its concerns over the past year about the rate of progress on the turnaround programme. To get through this control period they need £1.5 billion, £500 million has been provided and discussions are underway as to if £1 billion more will be sufficient, Coucher said.

He admitted the difficulties the company was experiencing this period will continue into the next asset management period.

“Looking ahead the company knows it needs to invest further at the next price review period and to back that they need to raise both debt and equity,” Coucher said.