Thames Water faces cash crunch, seeks £3 bln additional funding

Investing.com -- Thames Water Utilities has reported major financial challenges, indicating that it may run out of cash by March 2025 without an injection of £3 billion in additional funding. 

As per the company’s interim report for the six months ending September 30, dated Tuesday, this situation necessitates urgent financial restructuring and liquidity support.

The company is pursuing a Liquidity Extension Transaction (JO:TCPJ ) aimed at securing new funding of up to £3 billion. 

This initiative, supplemented by access to cash reserves and debt extensions, is expected to provide financial stability until at least October 2025, and potentially into May 2026, depending on the successful implementation of further measures. 

However, these plans are subject to conditions including creditor agreements and court approval of a Restructuring Plan, with the convening hearing scheduled for December 17, 2024.

Thames Water’s financial position is further complicated by its ongoing engagement with the water regulator, Ofwat, regarding its 2025–30 business plan under the PR24 price control process. 

The company’s plan proposes significant investments to enhance infrastructure resilience and deliver environmental improvements. 

However, securing the required funding is contingent upon regulatory approval and commitments from shareholders, who earlier this year declined to provide £750 million in new equity due to uncertainties surrounding the PR24 process.

Additionally, Moody’s has lowered Thames Water’s Corporate Family Rating to Caa1, and Standard & Poor’s has assigned ratings of CC (Class A) and C (Class B) to its debt, citing elevated default risks.

These downgrades have triggered a cash lockup under its financing arrangements, restricting the company’s financial flexibility.

In its interim financial statement, the board acknowledges material uncertainties that cast doubt on the company’s ability to continue as a going concern. 

The directors in the statement said that the Liquidity Extension Transaction is critical to maintaining operational continuity and enabling the company to meet its obligations.

They also recognize the potential for regulatory intervention or the application of a Special Administration Order if financial conditions deteriorate further.

Source: Investing.com