A judge has approved an emergency plan for Thames Water, Britain’s largest water company, to secure a £3 billion ($3.8 billion) rescue loan, which will allow the company to avoid nationalisation next month. The decision, made by Justice Thomas Leech in the High Court in London on Tuesday, is seen as a critical move to keep the utility afloat.
Thames Water, which serves 16 million customers in and around London, has been struggling with mounting financial issues and was at risk of insolvency. If the company ran out of cash, the government would have had to step in to temporarily take over its operations. However, the judge ruled that the company’s restructuring proposal, which includes securing the necessary rescue funding, would be a more favourable option for the public compared to other alternatives, including nationalisation.
Leech emphasised the public policy in favour of rescuing Thames Water and giving the market a chance to agree on a permanent restructuring plan before a government-backed special administrator would be needed. Thames Water Chairman Adrian Montague praised the ruling as a “significant milestone” in efforts to stabilise the company’s finances.
The company has faced harsh criticism for its financial practices, with many accusing it of paying excessive dividends and high salaries to executives while neglecting essential infrastructure investments. Thames Water executives, however, blame regulators for keeping customer bills too low, which prevented the company from generating the necessary funds to improve its aging infrastructure.
Thames Water has also been under fire for its role in the environmental crisis, with ongoing issues surrounding sewage spills into rivers and coastal waters. Environmental groups have condemned the company’s handling of wastewater treatment, with Thames Water being fined £100 million ($126 million) by the regulator Ofwat for failing to manage its sewage systems effectively.
As part of its efforts to stabilize the company, Thames Water has received approval for a 35% increase in consumer charges over the next five years, although it had initially requested a 53% increase to cover its investment needs. Despite the approval, there remains strong public dissatisfaction with the water sector’s handling of these issues.
Leech considered two competing proposals for the company’s future: one backed by Thames Water and another from a smaller group of investors. Ultimately, the judge found the company’s plan more viable and in the best interest of the public, avoiding a situation where government intervention might have been necessary.
