Castle Water has announced a proposal to create up to 2,000 jobs at Thames Water if it successfully acquires the struggling utility provider. This offer comes alongside an additional £1 billion cash injection, surpassing existing financial proposals as Thames attempts to avoid nationalisation amid ongoing financial difficulties.
The new proposal represents an improved approach after Castle Water’s initial bid was rejected earlier this year in favour of offers from the investment group KKR. Following KKR’s withdrawal from the bidding process, Thames Water has since engaged in advanced talks with its creditors and regulators to secure vital funding. The current discussions involve a consortium, named London & Valley Water, which has proposed a plan to invest in the utility and write off significant debt.
If accepted, Castle Water’s enhanced proposal would not only inject additional funds but also commit to a 25% increase in spending, which would include hiring engineers, scientists, and operational staff. The company aims to address critical issues, including pollution, by expanding and repairing waste treatment plant capacities.
Castle Water, co-owned by Conservative Party treasurer Graham Edwards, claims to be the largest independent water retailer in the UK. Its chief executive, John Reynolds, expressed confidence that the proposed turnaround plan could effectively mitigate pollution challenges faced by Thames Water. Reynolds also suggested that negotiations between Thames and its creditors have stagnated due to the nature of the proposals under consideration.
Contrarily, a spokesperson for the creditor group stated that claims of stalled discussions are inaccurate. “Thames Water needs £5 billion of urgent funding from committed and experienced new investors to deliver improved outcomes for its customers and employees,” the representative from London & Valley Water stated. This consortium is working diligently to secure a resolution swiftly, with a target to finalize a rescue deal before Christmas.
As negotiations progress, the consortium has indicated a willingness to write off around £4 billion, which represents 25% of Thames Water’s debt, in addition to the debts held by other creditors. The lenders plan to contribute an extra £1 billion in investment, supplemented by £150 million in new equity. This proposal, however, includes an ultimatum for the regulator Ofwat to accept renegotiated targets related to pollution incidents and water leaks in exchange for the financial backing.
A spokesperson for Thames Water confirmed that discussions are ongoing. “Discussions between TWUL’s (Thames Water Utilities Limited) senior creditors, the London and Valley Water Consortium, Ofwat, and other regulators in relation to a potential market-led solution to the recapitalisation of the company are continuing,” the spokesperson stated. They emphasized that Thames Water remains focused on delivering a recapitalisation transaction that benefits both its customers and the environment as soon as practicable.
The outcome of these negotiations is critical, not only for the future of Thames Water but also for the communities it serves, as the utility faces increasing pressure to improve its operational performance and environmental impact.
