Thames Water’s largest creditors have set out a £20.5 billion rescue plan aimed at saving the crisis-hit utility from collapse, but customers could end up paying more while receiving less in return. The plan, published in outline on Wednesday by the London & Valley Water consortium, would scale back investment compared with proposals approved by the regulator, Ofwat, while prioritising essential works to keep the company afloat.
Alternative to Nationalisation
The proposal comes as Thames, which supplies 16 million people across London and the Thames Valley, battles heavy debts and ongoing operational failures. People close to the plan said Ofwat’s most recent “final determination” — the detailed settlement setting bills and spending plans — was unworkable. They argue the new package offers “value for money” and is the only viable alternative to temporary nationalisation, an option the government is keen to avoid.
Investors Brace for Write-Offs
The four-page summary released by London & Valley Water suggests “significant write-offs by investors across the capital structure,” though details of how much debt will be written down are not yet clear. The consortium insists its plan will “fix the foundations of Thames Water” and chart a path to closing compliance gaps. Talks this week between Ofwat and creditors will determine the financial structure, including how much of a haircut investors will face.
Ratings Agencies Hold the Key
Once discussions with Ofwat are complete, the plan will be submitted to credit ratings agencies to assess whether it can return Thames Water to investment grade status. Regaining that rating is crucial to the utility’s operating licence. Ofwat has agreed to postpone a referral to the Competition and Markets Authority until October, leaving a short window to strike a deal. Officials at the regulator privately acknowledged that a partial rewrite of its previous determination was now unavoidable if a “market-based solution” was to be found.
Balancing Customer Impact and Financial Stability
So far, it is unclear how much new money London & Valley Water itself will contribute on top of the £20.5 billion in consumer funding. Critics fear the plan could shift too much of the burden onto households, while offering fewer projects than Ofwat’s original blueprint. An Ofwat spokesperson said the regulator would “review their plan carefully to assess whether it delivers a turnaround in Thames’s operational performance, and strengthens its financial resilience to the benefit of customers and the environment.”
Consortium Promises to Rebuild Trust
Mike McTighe, the chair designate of London & Valley Water, said the group’s focus would be on restoring confidence in the company. “Our core focus will be on improving performance for customers, maintaining the highest standards of drinking water, reducing pollution and overcoming the many other challenges Thames Water faces,” he said. “This turnaround has the opportunity to transform essential services for 16 million customers, clean up our waterways and rebuild public trust.”
A Thames Water spokesperson welcomed the move, saying it showed the consortium’s commitment to tackling the company’s financial and operational problems “without relying on taxpayer funding.” The spokesperson added: “We look forward to working with stakeholders to deliver a market-led solution that benefits customers and the environment.”
