Thames Water boss quits amid collapse fears

Thames Water, the largest water supplier in Britain, is facing an uncertain future as its CEO abruptly resigned, adding to growing concerns over the company’s stability.

Reports suggest that the government is now developing contingency plans in anticipation of a possible collapse. Ministers and regulators are particularly worried about Thames Water’s colossal debt, which stands at a staggering £14 billion. With interest rates on the rise and substantial investment demands, the company’s financial situation is under immense strain.

According to Sky News, discussions are taking place in Whitehall involving ministers from the Department for Environment, Food and Rural Affairs, Ofwat, and the Treasury. The talks revolve around the potential implementation of a special administration regime specifically designed for the privatised utility. This temporary renationalisation process, previously employed during the collapse of energy supplier Bulb in 2021, would ensure that water and sewerage services remain uninterrupted, regardless of Thames Water’s fate.

The government has been increasingly concerned about the financial strain faced by Thames Water over the past few months. The company is currently in talks with its shareholders to secure up to £1 billion in fresh funds, following a £500 million injection agreed upon last year. The largest shareholder is the Canadian pension fund Ontario Municipal Employees Retirement System, holding nearly a 32% stake. Other major shareholders include China Investment Corporation, the Universities Superannuation Scheme, and Infinity Investments, a subsidiary of the Abu Dhabi Investment Authority.

In addition to the turmoil surrounding Thames Water, one of the UK’s leading infrastructure experts, Sir John Armitt, warned that water bills might rise significantly. Armitt, chairman of the National Infrastructure Commission, revealed that sewage overflows need an estimated £50 billion investment by 2050, while an additional £20 billion is required to ensure sufficient water supply. When asked about the possibility of a 40% increase in water bills, Armitt responded, “They are probably not unrealistic.”

The potential collapse of Thames Water prompted a response from Darren Jones, chairman of the Commons business committee. In a tweet, he criticised the corporate practices, stating, “Corporate greed playbook: Load company with debt; Dividends, exec pay and debt finance up; Investment, worker pay, and customer service quality down; Company goes bust; Shareholders and execs walk away with millions; Tax payer picks up the pieces; Rinse and repeat.”

On Wednesday morning, Chancellor Jeremy Hunt held a meeting with regulators Ofwat, Ofgem, and Ofcom as the government seeks to address the ongoing cost-of-living crisis. The discussions aim to find solutions and mitigate the potential impact on consumers.

Thames Water has faced significant challenges due to its troubling track record regarding leaks, sewage contamination, executive remuneration, and shareholder distributions.

In response to mounting concerns, the company’s Chief Executive, Sarah Bentley, made an unexpected and immediate resignation announcement on Tuesday. Bentley’s departure followed criticism of her substantial £1.6 million salary and the company’s environmental performance.