LONDON (AP) — A judge on Tuesday granted approval for an emergency plan aimed at safeguarding the future of the largest water company in Britain, thus preventing a potential temporary government takeover. Thames Water, a major provider serving 16 million customers in and around London, sought court endorsement for approximately 3 billion pounds ($3.8 billion) in rescue loans to stave off the looming threat of being nationalized due to a cash shortage expected to hit next month.
Justice Thomas Leech, presiding in the High Court in London, deemed the company’s proposed restructuring as a more favorable option for the public compared to scenarios involving insolvency leading to government administration or an alternative plan put forth by a minority group of investors. In his ruling, Leech emphasized the importance of rescuing the Thames Water Group and allowing space for the market to reach a lasting restructuring agreement before resorting to special administration funded by the government.
In the absence of the required funding, Thames Water faced the prospect of running out of funds in the upcoming month, potentially necessitating temporary government intervention. Both the government and Thames Water assured customers that water supply would remain uninterrupted, regardless of the unfolding circumstances.
Thames Water’s Chairman, Adrian Montague, hailed the court decision as a crucial step forward in fortifying the company’s financial position. The company has faced criticism from consumers and lawmakers who point fingers at its practices of allocating substantial dividends to investors and high compensations to executives, while neglecting essential infrastructure investments in pipelines, pumps, and reservoirs. Company officials, however, argue that regulatory constraints kept bills at insufficient levels for a prolonged period, impeding necessary investments.
The water industry, spearheaded by Thames Water, has been under public scrutiny and condemnation due to frequent sewage spills in rivers and coastal areas, prompting widespread outrage. Charles Watson, the chairman of River Action, an environmental advocacy group, labeled the situation a national disgrace affecting both Thames Water customers and the environment, advocating for a special administration of the company. Conversely, the court’s decision places the burden of funding the company’s substantial debt obligations on customers, a move criticized by environmentalists and consumer advocates who argue that executives, investors, and shareholders should bear more accountability.
In December, Ofwat, the regulatory body overseeing water companies in England and Wales, sanctioned a 35% hike in Thames Water’s consumer tariffs over the next five years. Thames Water contended that a larger increase of 53% was necessary to finance critical projects and ensure the requisite financial returns to attract investors. The company has faced hefty penalties for sewage discharges, including a substantial fine exceeding 100 million pounds ($126 million) imposed by Ofwat in August for lapses in wastewater treatment management.
Judge Leech entertained differing proposals aimed at providing financial assistance to the struggling utility — one submitted by Thames Water and the other backed by a smaller coalition challenging the perceived costliness of the company’s plan, which favored
