Thames Water boss says turnaround to take a decade

Thames Water will “take at least a decade to turn around”, its boss has said, as the struggling company posted huge annual losses.

Thames reported a loss of £1.65bn for the year to March, while its debt pile climbed to £16.8bn.

The UK’s largest water and waste company claimed “significant rainfall and high groundwater levels” led to pollution incidents increasing by more than a third, but said it had tried to address “many of the underlying causes of our poor performance”.

The results came as Thames’s bosses were quizzed by MPs. Fears the company could collapse first emerged two years ago and its future is still uncertain.

Thames serves about a quarter of the UK’s population, mostly across London and parts of southern England, and employs 8,000 people.

Chris Weston, chief executive of Thames Water, said the company had made “good progress” on its performance, “despite the ongoing challenging financial situation”.

Last month, Thames suffered a major blow in its attempt to secure its future when US private equity firm KKR pulled out of a £4bn rescue deal.

The setback has increased the possibility that the company could collapse into a government-supervised administration.

Thames has continued to face heavy criticism over its performance in recent years, following a series of sewage discharges and leaks.

In May, it was handed a £122.7m fine, the biggest ever issued by the water industry regulator Ofwat, for breaching rules on sewage spills and shareholder payouts.

The watchdog has confirmed the fines will be paid by the company and its investors, and not by customers who were hit with water bill increases in April.

Water bills for households in England and Wales have risen by £10 per month on average, although costs vary depending on suppliers – Thames customer bills have gone up from £488 to £639 a year.

Thames has paused the bonuses of some senior executives that could have led to them getting £1m on top of their annual salaries.

The Ofwat fine was a factor in Thames’s heavy losses, but they were mostly caused by the writing off of a £1.27bn intercompany loan deemed to be no longer recoverable. It also spent £151m on restructuring costs.

Thames said the number of pollution incidents increased to 470 from 350 in the last calendar year.

Mr Weston said “prolonged wet weather meant further rain had nowhere to go other than to inundate our ageing and fragile sewer network”.

“Reducing pollutions and discharges is something we’re really focused on, and we plan to invest record amounts in our waste network during the next five years,” he added.

Mr Weston has previously called on the regulator to be lenient on fines, arguing Thames’s ability to secure investment and survive depended on it.

Sir Adrian Montague, chairman of Thames Water, apologised to a committee of MPs on Tuesday after being recalled to a hearing amid concerns over transparency at the water giant.

“It is rare for any company to be recalled; we regret that we have made that necessary,” he said.

The dire state of the Thames Water’s finances emerged in June 2023, but the company managed to secure a £3bn rescue loan earlier this year to stave off collapse.

Mr Weston said Thames recognised that its current gearing, which indicates how much a company depends on debt to fund its operations, was “too high”.

“To address this, we are progressing with our senior creditors’ plan to recapitalise the business which will see us return to a more stable financial foundation,” he added.

“This will come with a requirement to re-set the regulatory landscape and acknowledge it will take at least a decade to turn Thames around.”

Regardless of what happens to Thames or who owns the company, its water services will continue as normal.

On Monday, Thames became the latest supplier to announce a hosepipe ban, which will begin next Tuesday for customers in Oxfordshire, Gloucestershire, most of Wiltshire and some parts of Berkshire.