Thames Water: Fears mount that collapse of UK's largest water company will cost taxpayers billions of pounds

Fears are mounting that the potential collapse of a UK water company could cost the taxpayer billions of pounds. According to the Financial Times, officials at Defra have in place contingency plans for Thames Water if it collapses, under the name Project Timber after the water firm announced last year it was trying to deal with a debt pile of £14bn. 

In December the parent company of Thames Water, Kemble Water Holdings, was told by auditors that it could run out of cash by April if shareholders did not inject more funds into the company. The company has raised £500m and says shareholders would inject more than £3bn more but this is dependent on Thames Water getting what it wants from the regulator.

According to The Telegraph, a group of MPs are pushing for the Department for Environment, Food and Rural Affairs to reveal details of “Project Timber”, and it is understood that Thames Water executives have valued its rescue package at £5bn in talks with the government. 

When asked about the situation with Thames Water, a spokeswoman for the Prime Minister told NationalWorld: "I wouldn't get into speculation or comment on commercial matters." When the spokeswoman was asked more widely on whether water companies should be nationalised, she pointed towards the Plan for Water policies.

She said: "I'd point you more broadly to the policies we've put in place through the Plan for Water to ensure that companies are not paying for poor performance, making sure that we have the enforcement powers that we need and balancing that with making sure that companies are providing a service for their customers. That's the approach we are taking more broadly.

"We have our Plan for Water which sets out the approach we are taking with Ofwat, other enforcement companies and the water companies themselves. That's our policy and remains our focus in terms of delivery."

Sarah Olney, the Liberal Democrat MP for Richmond Park, told The Telegraph that “the public has a right to know what Ministers plan to do if this disastrous situation occurs” and the government’s “refusal to make their contingency plan in the event of Thames Water’s collapse public is nothing short of a cover-up.”

The Financial Times reported that Thames Water, the UK’s largest water company, is trying to strike a deal with the watchdog Ofwat that would give it permission to charge customers more to avoid the multi billion-pound taxpayer bailout. That plan would give Thames Water permission to increase bills by 40% by 2030, while also offering more leniency around regulator fines and rules around the dividends it can pay to shareholders. 

If the government or Ofwat felt that Thames Water was unable to pay its debts it could apply to the high court to invoke the special administration process. As part of the process administrators would be brought in to help manage the company. 

An Ofwat spokesperson said: “Ofwat does not comment on speculation. Thames Water needs to continue to deliver on its turnaround plan to improve its operational and environmental performance. It is for the company to secure shareholder backing to improve its financial resilience. We will continue to closely monitor the company’s progress as they do so to protect customers’ interests.”

A government spokesperson said: “Water companies are commercial entities and we do not comment on the financial situation of specific companies as it would not be appropriate. We prepare for a range of scenarios across our regulated industries - including water - as any responsible government would.” Thames Water declined to comment.