Following reports that Thames Water may be on the verge of collapse, the government has stated that it is prepared for "various scenarios."
Ministers declined to comment on the circumstances of the company, but regulator Ofwat monitored "the financial position" of all water companies. Thames Water has been criticized for its performance and is reportedly laboring under a $14 billion debt burden.
The company has yet to comment on the rumors regarding its future. No matter what occurs to Thames Water, the largest water company in the United Kingdom, which provides water to 15 million people in London and the South East, its water supplies will remain uninterrupted.
According to sources the corporation is negotiating business contingency plans with ministers and Ofwat. One option would be to place Thames Water under a special administration regime (SAR), in which the government would momentarily assume control.
After experiencing financial difficulties, the energy provider Bulb recently pursued this path. The Department of Environment, Food, and Rural Affairs (Defra) stated that the matter was between the company and its shareholders when questioned about the reports.
As any responsible government would, it continued, "We prepare for a variety of scenarios across our regulated industries, including water."Overall, the sector is financially resilient. Ofwat continues to monitor the financial health of all significant water and wastewater companies."
Sarah Bentley, the chief executive officer of Thames Water, resigned on Tuesday after only two years in the position. It occurred weeks after she had been asked to forego her bonus because of the company's management of sewage spills.
The company has not provided a reason for her departure, but it coincides with concerns about the firm's financial stability. Due to criticism of its management of sewage contamination and leaks, it has been under pressure to boost its performance. The company leaks more water than any other water utility in the United Kingdom, equivalent to 25 Olympic-sized swimming pools per day.
Last year, the proprietors of Thames Water, a consortium of institutional investors, invested £500 million in the company and pledged an additional £1 billion to help it recover. According to reports, the company has been scrambling to raise £1 billion to strengthen its finances.
Since their privatization in 1989, water companies have accumulated substantial debt totaling approximately £60bn, with Thames Water's debt totaling £14bn. Ofwat, the water company regulator, has long been concerned about Thames Water's ability to service its debt and raise the vast sums of money required to modernize its infrastructure in the face of increasing inflation and higher interest rates.
Since 2005, its proprietors have supported the decision to not pay dividends to external shareholders. There was a considerable jump from the previous month's total to this April's total for the annual water bill that a household in England and Wales pays on average, which was £448.
On Wednesday, former Environment Secretary George Eustice estimated that home bills will climb by around £42 over a "long time frame" in 2025. This hike will take place in 2025.