Thames Water rescue deal threatened by missing assets

Fresh doubt has been cast over the race to find a white knight buyer for Thames Water as it struggles to provide details of its labyrinthine network of pipes, sewage works and reservoirs.

Thames Water has stepped up the hunt for new investors willing to pump in billions of pounds of emergency capital after the Court of Appeal approved a £3bn emergency debt bailout from its existing creditors.

However, prospective suitors fear the search will be held up by the company’s failure to keep an accurate record of the mountain of assets that it has accumulated over the decades.

Thames Water has just weeks to hammer out a deal or one of the country’s most vital utilities faces a prolonged hand-to-mouth existence in which lenders drip-feed the company enough money every month to pay its bills.

“The board has to advance to the due diligence quickly but this makes that much harder. How do you put a value on the company if you don’t know what it owns?” a source close to the talks said.

The company hopes to select a preferred party from a field of six bidders by the end of June, and to be in the hands of a new owner by the end of September.

Thames Water says it maintains 20,000 miles of water pipes, uses over 68,000 miles of sewers, and owns 5,235 pumping stations. Its assets are valued at just over £20bn, according to an investor report published in September 2024.

However, last year it was revealed that as much as a third of its network was not mapped. In response to a Freedom of Information request from the Financial Times, both Thames Water and Southern Water admitted that they only mapped the pipes as they worked on them, meaning swathes of their respective networks were unaccounted for.

Southern Water, which has had to borrow hundreds of millions of pounds from hedge funds as its credit-worthiness has plunged, said it had lost track of as much as 40pc of its sewage system. The company blamed the ‘prohibitive’ cost of keeping a tally.

Missing data about the true scale and condition of the assets that Thames Water owns, has been a persistent issue in its efforts to persuade creditors to step in with fresh funds to see off the threat of nationalisation.

Without knowing precisely what infrastructure it is sitting on, the company and its lenders have struggled to calculate precisely how much money it needs to set aside for remedial work and upgrades.

An industry source said records of Thames’s creaking network had been lost over time, making it virtually impossible for the company to ever get a full handle on where all of its pipes are.

The company is suffering the consequences of chronic underinvestment after shareholders loaded it up with vast debts while awarding themselves large dividends and paying executives handsome salaries.

In a behind-the-scenes BBC documentary, which aired last week, chief executive Chris Weston blamed “low bills” for its predicament, while rejecting suggestions that investor greed was at fault.

After rejecting a demand from Thames Water to ramp up bills by 59pc over the next five years from £436 to £667, industry regulator Ofwat has granted permission for a 35pc increase instead – equivalent to an annual cost of £588.

The company, which provides water and sewage services to 16m customers in the capital and surrounding areas, is drowning in £20bn of debt and has repeatedly had to plead with creditors for leniency as it has struggled to keep up with the crippling costs of its borrowings.

Without the Court of Appeal’s intervention last week, Thames Water would have defaulted on a £190m loan repayment and ministers would have been forced to step in and nationalise the business. The company said it would have run out of cash by March 24.

Repeated fines have also exacted a heavy toll. Thames Water expects fines totalling nearly £430m over the next two years but there is the prospect of further fines for environmental failings.

A spokesman for Thames Water said it received bid proposals from six parties “and has since been conducting a detailed assessment of each proposal.”

“The company continues to target having agreed transaction terms in the second quarter of 2025, with a view to completing a recapitalisation in the third quarter,” it added.