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A group of MPs and charities will argue that Thames Water should be put into a government-handled administration at a court hearing to decide whether to approve £3bn in emergency funding.
A high court judge will hear from Britain’s biggest water supplier and groups of rival creditors on Monday before deciding whether to approve the rescue which would stave off a temporary nationalisation through a special administration. Without the debt lifeline, Thames Water has said it could run out of cash by March.
Thames Water, which has £17bn of debt, is at the centre of a public backlash against Britain’s privatised water industry, which has increasingly polluted rivers and seas with sewage, amid accusations that profit has been prioritised over the environment.
Clean river campaigners led by Charlie Maynard, the Witney Liberal Democrat MP, have made a written submission to the court. The case is expected to last four days.
Maynard said in the submission that he was opposed to the restructuring plan in the interests of the company’s 16 million customers.
He argued that servicing the emergency fund will not be financially sustainable in the mid or long term for the company, and did not make appropriate provision for the company to fulfil its legal obligations to provide water and sewerage services and not to pollute rivers.
Ultimately customers will be forced to pay for the emergency loan, which comes with a 9.75% interest rate, in further bill increases, his submission claimed.
The MP, whose constituency has been at the centre of mounting anger over raw sewage pollution into the River Windrush, is leading the challenge on behalf of 34 clean river groups, including Windrush against Sewage Pollution, and is backed by other MPs in the water company region, and 28 parish councils.
“I make this statement as a matter of public and customers’ interest,” he told the court in a written submission.
Last month, Thames was granted approval to seek the £3bn cash loan, which the troubled company said was crucial to ensure it had enough money to stave off temporary nationalisation.
Thames has said it is confident its plan will succeed as it has the backing of creditors holding more than 90% of its secured debt, despite opposition from a group of lower-ranked creditors.
The judge must decide whether the dissenting creditors would be no worse off in the most likely alternative to the plan, which Thames Water has said is that the company is placed in special administration – though that is disputed.
Under the proposals, Thames would get access to additional funding, cash reserves and debt extensions, giving it breathing space to secure its survival in the long term by raising £3.25bn in new equity alongside a debt restructuring.
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The lower-ranked creditors say the plan benefits the senior creditors unfairly and that its 9.75% interest rate makes it too costly. They have proposed their own package.
Maynard challenged the cost of the financial lifeline. “It would encumber Thames Water with expensive bridge liquidity … significantly curtail … financial headroom for its operations and infrastructure and divert a large proportion of the revenue from customer bills towards paying debt interest and fees,” he said.
“No one can have any real confidence that the restructuring plan will ultimately solve the financial performance that Thames Water now finds itself in,” said Maynard.
Evidence from Dieter Helm, professor of economic policy at Oxford University, provided to the court, said Thames had failed on the capital maintenance of its assets and had “profit maximised by gearing up its balance sheet at the outer limits of what was sustainable”.
“Thames used the balance sheet to mortgage the assets and pay out the proceeds in special dividends and other benefits to shareholders,” Helm added.
