A £10 billion takeover proposal for Thames Water, the UK's largest water company, has raised concerns among campaigners that customers may face higher water bills. The proposal, led by a consortium of over 100 creditors, including hedge funds and distressed-debt investors, aims to write off billions of pounds of debt and inject £10 billion of new capital into the company. Thames Water has already warned that bills will need to rise by 40% to fund infrastructural upgrades.
The consortium, called London & Valley Water (L&VW), claims that their plan is the fastest way to turn the company around. However, campaigners argue that the proposed takeover risks leaving customers paying for the company's debts while investors continue to profit from it. Thames Water is currently carrying around £20 billion in debt and has been on the brink of collapse for years. The company's water bills for consumers rose sharply last year, by around 40%.
A cross-party committee of MPs has called on the government to reject the deal and take the struggling water company into special administration instead. The Environment, Food and Rural Affairs (Efra) Committee's report stated that the creditors were "reaping millions in debt interest and fees" while negotiations dragged on. The committee recommended that the government explore all alternatives, including special administration.
Campaigners say that the proposed takeover would leave customers paying for the company's debts while investors profit from it. Sophie Conquest, a campaigner at We Own It, stated that there was little reason to expect the new ownership structure to make bills cheaper. Research from the University of Greenwich estimated that public ownership of the English and Welsh water companies could save £3bn to £5bn a year in financing costs.
The Efra Committee's report also highlighted that Thames Water could face more than £900m in penalties over the next five years for poor performance, including sewage pollution, leakage, and sewer flooding. Alistair Carmichael, chair of the committee, said that the government should reject offers from the company's creditors in return for relief from fines for pollution and poor service.
Andy Burnham's government is under pressure to decide what happens next. Conquest said that accepting the creditors' deal would be a "real political risk" for Burnham's government. Burnham has previously called for Thames Water to be nationalized, although that was before he became prime minister. Conquest argued that special administration followed by permanent public ownership is the best solution for Thames Water bill payers.
The proposed takeover has sparked concerns over the impact on water bills for customers. Conquest stated that bill payers under a privatized system, or a public system, will always be the ones who pay for infrastructure upgrades. The case for public ownership is clear, with campaigners arguing that it could save bill payers millions of pounds in financing costs.
Key points
- Thames Water faces a £10 billion takeover proposal from hedge funds.
- Campaigners warn that the proposed takeover could lead to higher water bills for customers.
- MPs have called on the government to reject the deal and take Thames Water into special administration.
