Thames Water's primary lenders are offering the government a "golden share" and greater involvement for local authorities as a means to prevent the nationalization of the embattled water supplier. The proposed deal comes as the government recently rejected a previous rescue plan, and lenders are reportedly preparing legal action should the new administration take the company into public hands.
Andy Burnham, in his inaugural speech as prime minister, indicated a desire for increased public control over essential services. The latest proposal mirrors a structure previously agreed upon between United Utilities and Greater Manchester when Burnham served as the city's mayor, granting local authorities enhanced participation in the firm's governance.
The consortium of lenders, known as London & Valley Water (L&VW), had previously put forward a £10 billion plan. This plan included writing off nearly half of Thames Water's debt and injecting new capital in exchange for flexibility on future pollution penalties. However, this initial proposal was rejected by the government in June. At the time, then-environment secretary Emma Reynolds stated that the plan did not sufficiently address consumer or environmental concerns.
Sources close to the current negotiations report that creditors have sweetened the revised offer with hundreds of millions of pounds in new funding, in addition to the existing terms. The "golden share" would provide the government with veto power over key decisions.
L&VW stated on Tuesday that the new offer incorporates "material improvements" over the previous one and is expected to benefit customers. A spokesperson for the consortium asserted that their plan remains the most rapid and dependable route to resolving Thames Water's complex issues and improving outcomes for customers and the environment, adding that the deal would be achieved without any government funding or cost to taxpayers.
Concerns regarding Thames Water's potential collapse first surfaced three years ago. The company, which serves 16 million people across London and southern England with water and wastewater services, recently warned that it could face a cash shortage by November. Last year, the company was fined £122.7 million by the industry regulator Ofwat for violations related to sewage spills and shareholder payouts, marking the largest penalty ever issued by the regulator.
Sources familiar with the creditors' position have previously indicated that in the event of nationalization, they would seek full repayment of outstanding debts, a move that could result in a multi-billion-pound liability for the government. Despite such potential outcomes, if the company were to cease operations, essential drinking water and sewerage services for households would continue to be provided.