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Thames Water has said it hopes to agree a deal with one of six bidders by the end of June and has secured a delay to a review of its bill increases to smooth the rescue process.
The UK’s biggest water company said negotiations were continuing and it wanted to complete the transaction by the end of September.
It comes after the Guardian revealed Thames’s requests for special treatment on everything from bills to fines, piling pressure on Ofwat amid a review into the future of regulation in the sector.
Last year, the water watchdog refused the company’s bid to raise bills by 59%, allowing only a 35% increase over the next five years.
It asked the Competition and Markets Authority (CMA) to look again at that decision, but has now agreed with Ofwat – which has to submit this referral formally on its behalf – to delay the appeal for 18 weeks.
Thames has just eight weeks to decide on a bid and perform the necessary due diligence checks to secure it, or face living from month to month as it draws down fresh tranches of money from its existing creditors until autumn next year.
The water company, which serves 16 million customers in London and south-east England, is suffocating under nearly £20bn in debt, and struggling to manage public outrage at the environmental harm caused by its operations. It discharged a record 50% more raw sewage into rivers last year compared with the previous 12 months, data seen by the Guardian shows.
On Monday Thames won approval from the court of appeal for a £3bn emergency debt bailout from its existing creditors to avoid an immediate collapse into a special administration regime, a form of temporary nationalisation.
Thames is now reviewing a six approaches from potential suitors, it said.
CK Infrastructure Holdings, Covalis Capital, Castle Water, and the private equity firm KKR are among the groups putting themselves forward. The majority of bidders were seeking reassurance that they would be able to avoid or manage future fines and punishments for poor performance, Thames said. It did not explain what these were, or the scale of special treatment it was seeking.
“Most proposals are conditional on further, and varying, regulatory support and accommodations being achieved which the company intends to progress in the coming months as part of its efforts to achieve a sustainable recapitalisation,” it said.
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Ofwat said it had agreed to Thames’s request for a delay for a CMA referral to try to up its ability to increase its bills, for 18 weeks in order to help its efforts to secure a buyer.
“Ofwat considers that this proposal creates the opportunity to recapitalise and transform the business sooner than is likely to be possible if the company remains in the CMA redetermination process,” it added.
The watchdog’s own role is being examined closely by the Independent Water Commission, a review into water regulation led by Sir Jon Cunliffe. It is examining how to rebuild trust in the water sector, and will begin taking in evidence from 27 March on areas including setting bills, financial resilience and environmental regulation.
The Thames Water chair, Sir Adrian Montague, said: “We appreciate Ofwat’s time and constructive approach to our recent discussions and look forward to working with Ofwat and our other stakeholders over the next few months to achieve our shared goal of a sustainable recapitalisation of the company, so that it may better serve its customers and stakeholders for decades to come.”
