The British government said on Wednesday it would consider temporary state ownership for Thames Water, which supplies a quarter of British households, if the company cannot stabilise its finances.
City veteran Adrian Montague, former chairman of British Energy, Anglican Water and Aviva, is due to be named the new chair of Thames Water, The Times and Financial Times reported, just two days after the company replaced its chief executive.
Thames Water did not immediately respond to a Reuters request for comment.
The management changes reflect the pressure on the company, which has £14 billion (US$17.7 billion) of debt and has asked shareholders for a £1 billion equity injection to strengthen its balance sheet and fund a turnaround.
Seeking to calm worries of collapse, water regulator Ofwat said Thames Water needed to improve its financial resilience, but its £4.4 billion of cash reserves and committed funding provided “strong liquidity”.
Water companies in England and Wales are a political headache for Prime Minister Rishi Sunak’s Conservative government, given a public outcry over the release of sewage into rivers and seas, and rising bills that have raised questions over the Conservatives’ privatisation of the sector in 1989.
A poll published by YouGov on Thursday showed that seven in 10 Britons believe water companies should be nationalised.
Concern spreading
Listed British water stocks dropped on Thursday with shares in Severn Trent, United Utilities and Pennon were down more than 2%.
But analysts said those companies were better capitalised than Thames Water.
Its debt burden is made worse because about half of its repayments are linked to inflation, which has soared since late 2021.
The financial resilience of some of the other unlisted water companies is also under scrutiny as, like Thames Water, they have amassed vast debts since privatisation.
Ofwat said in December it was also engaging with Southern Water, which is majority owned by Macquarie, Yorkshire Water, which is majority owned by the private equity arm of Singapore’s GIC investment group, as well as SES Water and Portsmouth Water.
The regulator is responsible for setting prices, ensuring environmental targets are met and monitoring the finances of the water companies in England and Wales, many of which are owned by infrastructure investors, pension and sovereign wealth funds.
Thames Water owners include Ontario Municipal Employees Retirement System, the UK’s Universities Superannuation Scheme and China Investment Corp.
Since privatisation, critics have accused the operators of prioritising dividend payments over much-needed infrastructure upgrades.
Ofwat is toughening up its rules, including stopping dividend payments in certain cases, and confirmed in a separate statement on Thursday that bonus payments for water company executives would only be permitted when performance justified them.