Crisis-hit Thames Water has warned that its cash risks running dry by the end of May next year due to a lack of new investment, forcing it to prepare a plan for its creditors.
The country’s biggest water company, which serves almost a quarter of the population, previously said it had £2.4 billion of liquidity at the end of March.
The company said on Tuesday that the sum had fallen to £1.8 billion at the end of June.
Cash-strapped Thames Water has struggled to secure new funds from existing shareholders after they withdrew a promised £500m investment amid a dispute with the sector regulator.
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Its annual results statement said of the fight: “The board concluded that whilst it is possible that capital will be received by 31 March 2025, this should no longer be assumed for the purposes of calculating the financial settlement forecast.”
It added that it was now necessary to prepare a “corrective plan” for its creditors as it did not meet the terms of certain compliance tests, complicating its ability to function normally in areas such as incurring debt and making payments.
The report on Thames Water, which has debts of more than £15 billion, also showed the payment of two dividends worth £158.3 million in March – raising the prospect of further sanctions from Ofwat over rules that govern rewards for poorly performing suppliers.
Thames Waters financial survival has been in question since Sky’s City editor Mark Kleinman revealed in June last year that ministers had begun discussions about contingency plans for a possible special administration that would place the company in temporary public ownership.
Such a measure would allow daily services to continue while its future is determined.
Shareholders have so far refused additional funds, blaming the structure of regulator Ofwat.
The battleground centers on industry-wide business plans for 2025-2030, which are currently under consideration.
Thames is targeting an increase in customer bills of up to 44% over the next five years, in return for almost £22 billion in spending on improvements.
Ofwat, which is expected to give its provisional verdicts on the company’s plans on Thursday, had previously rejected calls for a 40% rise in bills.
This determination led to the withdrawal of promised investment, leaving Thames faced with the prospect of having to secure new investors.
Its parent company has already stopped paying interest on the debt.
Thames signaled that Ofwat’s final decision on its business plans in December would be crucial in determining its future.
Chief Executive Chris Weston said on a conference call with analysts that he expected to begin a formal process to raise capital in the fall, which would be completed in early 2025.
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Its demands are likely to continue to leave a bitter taste at Ofwat.
The company, which has long been accused of prioritizing shareholder bonuses over infrastructure investment, has been pursuing performance targets covering sewage leaks and discharges for many years.
It left the Thames at the mercy of the watchdog’s fines regime.
Sky News reported last month that Thames was facing the prospect of a £40m fine + Ofwat more than £37.5 million payments to its owners last autumn.
The payment of the controversial dividend from Thames Water Utilities Limited, the operating business, to parent company Kemble Water and its affiliates, is considered to have breached rules overseen by the regulator which aim to avoid rewarding shareholders during periods of poor performance.
The £158.3m revealed on Tuesday went to two of its struggling holding companies, Kemble Eurobond and Thames Water Limited.
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