LONDON (Reuters) – Thames Water will need “substantial sums of money” to stabilise its finances, regulator Ofwat said on Tuesday, as it acknowledged that it should have stepped in earlier to stop companies taking on so much debt.
Thames Water is fighting to secure more equity as it struggles under the weight of its 14 billion pound ($18 billion)debt pile, casting a shadow over the whole sector in Britain which needs to upgrade ageing infrastructure and stop sewage spills.
Ofwat Chief Executive David Black told a committee in the upper House of Lords on Tuesday that the problems at Thames Water were the most acute.
“We need to see their revised business plan but we think it’s substantial sums of money (that are needed),” he told parliament.
He said Ofwat had faced huge resistance from investors in water companies, when trying to bring down the level of gearing, and that there may not be an appetite from current investors to invest further money.
“We’re very much of the view that companies need to bring down their level of gearing to reasonable levels,” he said.
“We’ve faced huge resistance from investors to doing so, and from companies.”
Black said talks were ongoing between Ofwat, Thames Water and its investors about the provision of 1 billion pounds ($1.27 billion) of new equity the company says it needs to be able to turn around the business.
That follows a period when, according to Ofwat, the water companies built up too much debt from around 2006.
“I think we should have stepped in at that point to stop companies gearing up,” he said. “We’ve changed companies’ licences, we have got the powers to stop that happening now.
“At the time, we really didn’t have the power to stop that happening.”
($1 = 0.7859 pounds)
(Reporting by Paul Sandle and Muvija M; Editing by Kate Holton)
