Bosses at Thames Water have said its financial troubles were partly caused by bills being kept “very low” as the utility giant admitted its parent company does not currently have the funds to repay a £190 million loan due next spring.
The firm, which has seen its debt mountain swell further to £14.7 billion, also said it would take longer than its current three-year turnaround plan to complete a necessary overhaul.
It came as Thames Water bosses faced questions from Parliament’s Environment, Food and Rural Affairs Committee over its finances.
Alastair Cochran, joint interim chief executive officer of Thames Water, told MPs it has £1.35 billion of external debt, with £190 million of this due to mature in April 2023.
When asked by MPs if the supplier’s holding firm had the money needed, he replied: “Not currently, no.”
📺Watch the first panel of our @thameswater session.
We're hearing from▪️Alastair Cochran, Interim Co-CEO, Thames Water▪️Cathryn Ross, Interim Co-CEO, Thames Water▪️Sir Adrian Montague CBE, Chair, Thames Water
Watch live: https://t.co/yAciW6erxZhttps://t.co/BSXvlIOgSt
— EFRA Committee (@CommonsEFRA) December 12, 2023
Mr Cochran, who is also the firm’s finance chief and has co-led the firm since previous boss Sarah Bentley stepped down in June, said it will discuss extending the loan with shareholders.
In the committee, Thames Water’s chairman Sir Adrian Montague said moves by regulator Ofwat to limit price increases for customers are partly to blame for Thames Water’s financial troubles.
“I think we would say that some of the problems that we are now encountering were because bills were kept deliberately very low over the past period,” Sir Adrian said.
“It seems a case of ‘we would say that wouldn’t we’ but there is truth there.”
Last week, Thames Water reported a 54% drop in pre-tax profits to £246.4 million in the six months to September 30, despite a 12% rise in revenues.
The chairman also apologised to MPs about the impression given about its finances during a previous committee session.
In July, the firm was handed a £750 million lifeline which included around £500 million from shareholders.
In the previous committee session, the company described this as “new equity”. The Financial Times later reported that this was a loan to Thames Water’s parent company, which carries an 8% interest rate.
Sir Adrian said he “stands by” describing the funding as equity but added “we were not clear enough in unpacking the different elements of the shareholders contribution”.
He admitted that the company used “complex” financial arrangements.
The bosses also faced significant scrutiny over the utility company’s decision to pay a £37.5 million dividend in October despite missing pollution and leakage targets, while debt also grew.
Sir Adrian defended the pay-out to shareholders, saying a failure to give dividends “would curtail or derail the possibility of receiving further equity from our shareholders”.