Thames Water says turnaround will ‘take time’

Thames Water has said that reviving the business will “take time” as it reported sliding profits and an increase in its huge debt pile.

Profits for the first half of its financial year more than halved to £246m, while debts rose 7% to £14.7bn.

Thames Water secured extra funds in July, but questions have been raised over the nature of the support.

The head of the Environment Committee said he could recall the firm’s boss to be quizzed by MPs over the deal.

Concern over Thames’ financial strength earlier this year led to speculation it might be taken over by the government.

But the company’s two interim chief executives have said that will not be necessary, as it has more than £3bn in cash and recently got a £500m cash injection from its shareholders.

However, the Financial Times reported recently that the source of that money was a further loan to its parent company, Kemble Water Holdings.

The chairman of the Environment Committee, Sir Robert Goodwill, has questioned whether Thames has represented its finances accurately.

Speaking to the BBC’s Today programme, Sir Robert said: “The question I think we need to ask Thames Water is… how will that debt be serviced, because unless they increase dividends, to enable Kemble Water Holdings to service that debt, they could end up in an even more difficult situation.”

Sir Robert said he was meeting Thames Water later. “My suggestion will be that we invite the chief executive, Cathryn Ross, back to the committee to just explain why it is that although they say they’ve had more equity introduced, the FT report suggests that it is actually more debt piled upon the debt that’s already there.”

The company has already written to Sir Robert saying that the £500m “does not increase the debt burden” on Thames Water.

Investors have also said they will pump in an additional £750m but that is contingent on the regulator agreeing to bill increases of 40% by 2030.

Thames Water’s co-chief executives, Cathryn Ross and Alastair Cochran, said: “It is clear that immediate and radical action is required.”

They added: “Turning around Thames will take time. We simply cannot do everything that our customers and stakeholders wish to see at a pace and for a price that everyone would like.

“We will continue to make the tough choices required to deliver what matters most to our customers and the environment.”

A spokesperson for Thames Water added the company was “in a robust financial position and are extremely fortunate to have such supportive shareholders”.

Last week, the auditors of Kemble Water Holdings warned there was a “material concern” over its future.

This was partly due to uncertainty over how a £190m loan, which is due for repayment in April 2024, will be refinanced.

Thames’ latest results show that the number of pollution incidents increased during the six months to September.

It admitted performance had “deteriorated”, with the number of category 1-3 pollutions – where category 1 is the most serious – had risen to 257 from 217 in the same period last year.

The company said its three-year turnaround plan “addresses and mitigates the major drivers of pollutions across our wastewater network and sewage treatment works”.

“We are committed to tackling the root causes of pollutions to meet the expectations of our communities and the needs of the environment.”

Earlier this year, Thames Water was fined £3.3m after it discharged millions of litres of untreated sewage into two rivers near Gatwick in 2017, killing more than 1,400 fish.

Later on Tuesday, Labour will table a motion calling on the government to give the water regulator, Ofwat, powers to ban the payment of bonuses to water bosses if their companies are discharging “significant” levels of raw sewage into UK waterways.