Thames Water has just 11 months of liquidity left before Ofwat account decision

Thames Water has enough liquidity to fund its operations for just 11 months, the ailing water company warned on Tuesday.

The debt-ridden utility blamed shareholders for refusing to provide the group with £500m of emergency funding in March, citing concerns that regulators’ demands would make the company’s business plan uninvestable.

Thames Water had liquidity of around £2.5 billion at the end of March, but this had fallen to almost £1.8 billion at 30 June, of which £1.5 billion was available cash and £296 million was undrawn committed banking facilities.

The company will seek to raise new equity and strengthen its liquidity position once regulator Ofwat makes a draft decision on the company’s business plan on July 11.

Ofwat will decide by how much the company may increase consumer prices between 2025 and 2030.

Thames Water, which has around 16 million customers in London and the Thames Valley, wants to increase bills by up to 44 per cent to fund £3 billion of investment.

Proposals for significant increases in consumer bills have been met with outrage in some areas, following criticism of the group’s high dividend payouts over the past decade.

The Berkshire company paid out £195.8m in dividends in the 12 months to March, compared with just £45.2m the year before.

According to the company, the dividends were intended to help two financially troubled holding companies, Kemble Eurobond and Thames Water Limited.

Meanwhile, net debt rose by more than £1.2bn to £15bn, making it the most heavily indebted water company in England and Wales.

The company saw the number of pollution incidents rise from 331 to 350 last year, following a 40 percent increase in rainfall, although the number of spills fell to the “lowest” annual average ever.

Still, underlying revenue rose 10 percent to £2.4 billion, helped by inflation-related costs for water and wastewater services, as the company recovered from a £132.3 million loss to a profit of £139.8 million.

Chris Weston, CEO of Thames Water, said: “The challenges we face are well documented, but our operational and financial performance over the past year shows good progress.”

He added: ‘We have made year-on-year improvements in our key water metrics. Leaks are now lower than ever and we are supporting more customers through our social tariffs.’

Much of the company’s debt was incurred between 2006 and 2017, when Thames Water was owned by infrastructure bank Macquarie.

Critics allege the Australian company, often nicknamed the ‘Vampire Kangaroo’, took out billions of dollars in loans and dividends during its time running Thames Water.

Since then, Thames Water’s debts have continued to rise, partly due to interest rates pushing up borrowing costs and numerous fines for leaks and discharges.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, warned that the government may have to take control of Thames Water if the company collapses.

She said: ‘The new Labour government wants to avoid ‘nationalisation’ but will still have to intervene as it is such a vital part of the country’s infrastructure.

‘It is likely that contingency plans are being worked on to set up an independent, public organisation to run the business if the financial plug is pulled.’

However, senior Labour officials have indicated that a full nationalisation of Thames Water is not an option, as such a proposal would breach government “fiscal rules”.