Thames Water must return to investors for fundraising, regulator says

Thames Water is to prepare to approach investors for a fundraising effort as part of a deal with the regulator aimed at stabilising the ailing utility.

Britain’s biggest polluter, which is burdened with a £15bn debt mountain, has breached the terms of its operating licence after S&P, following Moody’s lead, re-rated Thames’ top-rated bonds as junk.

Industry regulator Ofwat said today that Thames Water has agreed to remedy the breach, with a number of undertakings that it must adhere to until it achieves two investment grade credit ratings.

Ofwat said Thames Water must “take the necessary steps to undertake a capital raising”.

This could prove a difficult task for the group, as investors publicly refused to put more money into Thames earlier this year.

Thames and other water companies are being allowed to increase their customers’ bills for next year amid concerns some companies could go bust.

Ofwat said Thames must now appoint new non-executive directors and develop an “appropriate” operational business plan to turn things around.

The group has also agreed to an independent monitor who will report ‘regularly’ to Ofwat and have the right to access company information.

“These commitments will remain in place until the company has achieved two further investment grade credit ratings,” Ofwat said.