Thames Water: Water firm seeks to increase bills by 40% and face lower fines to avoid multi billion-pound bailout

Thames Water is seeking to increase its bills, pay dividends and face lower fines to avoid a potential multi billion-pound taxpayer bailout. The water firm is trying to avoid being taken over under the government’s special administration regime after officials at the Department for the Environment, Food and Rural Affairs (Defra) have made contingency plans for the firm.

According to the Financial Times, officials at Defra have in place contingency plans for Thames Water if it collapses, under the name Project Timber. It comes 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.

The Financial Times reported that 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 having to be taken. 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 told The Guardian: “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.