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Thames Water investors pump in £750 million to hold off government takeover

Investors have contributed an extra £750 million of equity funding to Thames Water in a bid to stave off a government takeover. 

While the amount is considerable it’s less than the £1 billion it was hoping to raise.

Ian Marchant, chairman of Thames Water, said: “The additional investment announced today is the largest equity support package ever seen in the UK water sector and underscores our shareholders’ commitment to delivering Thames’ turnaround.”

Thames Water is £14 billion in the red, while it is under growing pressure to tackle sewage spills and leaks by upgrading ageing infrastructure.

Susannah Streeter, head of money and markets, Hargreaves Lansdown, said: ‘’The rapid leak of confidence in Thames Water has been patched up with a £750 million cash injection, which has also lifted sentiment around listed utilities today.

“Severn Trent, United Utilities and Pennon all rose in early trading, as water industry worries temporarily receded, but have since lost some ground again. Thames Water’s institutional investors have made the difficult decision to provide the lifeline to help refloat the company, rather than risk seeing their holdings potentially evaporate if the government took emergency control.

“However, this is very much an emergency pumping operation, rather than shoring up Thames Water’s finances for the longer-term. The sum agreed to be paid is less than the £1 billion Thames Water said it initially needed, so there is a shortfall in financial lifeline. In addition, the investors will be staring at the huge bill for the infrastructure work needed to mend the leaks and sewage discharges which the company keeps being fined for.

“Thames Water is a casualty of the rapid escalation of interest rates but is also suffering because it was stripped of a cash float which should have protected it when monetary tides turned. Its profits were siphoned off in the good times, rather than being used to build up a bulwark for when borrowing costs surged back upwards. Thames Water’s debt amounts to roughly £14bn or, reportedly, around 80% of the value of its business. That makes it the most heavily indebted of England and Wales’s water companies.”