Thames Water’s £10 billion creditor rescue deal should be ditched, say MPs
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deal → ditch → ?
Thames Water’s rescue deal by lenders should be rejected and the Government should take it back into public control after the stricken supplier has been left in a damaging “doom loop”, according to an influential group of MPs.
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supplier → reject → MPs
A report by the Environment, Food and Rural Affairs (Efra) Committee said the £10 billion takeover plans by a consortium of over 100 creditors in Thames Water does not have “the interests of the public, the company or the environment at heart”.
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plans → say → heart
The cross-party committee gives a stark warning that the top priority for the bidders, called London & Valley Water, is to “extract immediate value from Thames Water, not steer it to long-term success”.
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priority → give → success
The report also raises concerns among the MPs on the committee over the lack of information available on the many creditors in what it claims is an “opaque” consortium.
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it → raise → creditors
The rescue plan by creditors – including UK and US investment companies such as Elliott Management and American private capital firm Apollo Global Management – is seen as the final realistic option to avoid Thames Water being placed into a special administration regime after a previous deal with US private equity giant KKR collapsed in May last year.
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deal → include → May
Creditors – who collectively own about £17 billion of Thames Water’s debt mountain of more than £20 billion – have already been sent back to the drawing board after former environment secretary Emma Reynolds warned in June she did not believe their plan went far enough to protect customers or the environment.
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plan → own → customers
The Efra Committee said laws needed to be changed to allow the Government to trigger a special administration on performance grounds without having to wait until the company collapses into insolvency – something that may risk a legal challenge from Thames Water creditors, it argues.
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it → say → creditors
This has left Thames Water – the UK’s biggest water supplier – in a “doom loop”, according to the MPs.
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This → leave → MPs
“The Government should reject offers from the company’s creditors in return for relief from fines for pollution and poor service.
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Government → reject → pollution
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“We do not believe this opaque consortium of 100 hedge funds and others has the interests of the public, the company or the environment at heart.
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consortium → read → heart
“This will likely see Thames Water placed in Special Administration once its money runs out at the end of the year.
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money → see → year
“But this may be the only way to reset the fortunes of this company and put it on a sustainable footing in the long-term.”
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this → reset → term
He said the cost to the Government could be recouped by a future sale of Thames Water in the future once its finances and performance are back on track and a buyer can be found.
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buyer → say → track
Prime Minister Andy Burnham signalled before taking the reins at Number 10 that he wanted to bring in a 10-year plan to renationalise the water industry, saying reform was needed to put the public interest first.
But the Government has since remained tight-lipped on any renationalisation plans for Thames Water, despite the company warning it only has enough money until the year end.
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it → signal → end
The Department for the Environment, Food and Rural Affairs insisted all options were still under review.
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options → insist → review
A Defra spokesperson said: “Thames has been failing the public for a long time, and this Government has been clear that nothing’s off the table when it comes to a solution that delivers for customers and the environment.”
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that → say → customers
Mr Carmichael said the Efra Committee urges the Government to strengthen the Special Administration Regime “so that a future regulator can intervene earlier”.
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regulator → say → Regime
He said: “A loophole that allows bondholders to take control of a water company without oversight must also be addressed.
“
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bondholders → say → oversight
The chaos of another Thames Water-style saga must not be repeated, and steps must be taken to stop the ‘doom loop’ that besets some companies, where fines for failure compound their inability to improve and leads to increased customer bills.”
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fines → repeat → bills
A spokesman for London & Valley Water said: “This group of investors has never been in control of the company and has never received a dividend from Thames Water.
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group → say → Water
“They have stepped in to fund a significant revenue shortfall to ensure Thames Water’s record capital investment programme can continue without disruption.”
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programme → step → disruption
He added: “Our enhanced proposal will address all feedback from Ofwat and ministers and is the fastest route to fix Thames Water’s complex problems.”
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proposal → add → problems
A Thames Water spokesperson said: “Thames Water needs to be recapitalised and put on a firm financial footing… anything that delays the recapitalisation risks slowing the turnaround.”
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that → say → turnaround
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