Creditors pitch £20.5bn lifeline for Thames Water, cutting projects to avoid nationalisation

Thames Water’s survival hinges on a £20.5bn rescue plan that would see customers paying more for fewer projects, as a new creditor-led consortium moves to prevent the collapse of the UK’s largest water company.

The blueprint, published in outline on Wednesday, has been drawn up by London & Valley Water, a group of investors that hold a large portion of Thames Water’s debts. Their proposal aims to stabilise the debt-laden utility, which supplies 16 million people, while avoiding temporary nationalisation.

Under the plan, consumer bills would be channelled into what the consortium describes as “core priorities”, with infrastructure projects scaled back compared with the programme originally approved by regulator Ofwat. The details of which projects would be cut have not yet been disclosed, prompting concern among campaigners.

People close to the proposal argue that Ofwat’s final determination — the detailed framework for pricing and spending issued last year — was “not deliverable” and risked pushing Thames into insolvency. By contrast, they say the new package would provide “value for money” and restore the company to financial health.

The four-page summary released so far offers only broad strokes. It acknowledges that “significant write-offs by investors” across Thames Water’s capital structure will be necessary, but does not specify the size of those losses. Talks this week between the consortium and Ofwat will focus on how much of a financial hit creditors are prepared to accept.

The restructuring plan is also being scrutinised by credit ratings agencies, which must be satisfied that Thames Water can be lifted back to investment-grade status. Without that rating, the company would be in breach of its operating licence.

Ofwat last year approved bill increases for customers but later agreed to defer Thames Water’s appeal to the Competition and Markets Authority. That deferral runs until October, creating a narrow window in which the parties must hammer out a deal.

Some within the regulator describe the creditors’ plan as a “partial rewrite” of the final determination — but one that is now considered unavoidable if Thames Water is to be saved without state intervention.

A spokesperson for Ofwat said: “We continue to engage with the creditor group and will review their plan carefully to assess whether it delivers a turnaround in Thames’s operational performance, and strengthens its financial resilience to the benefit of customers and the environment. We expect to receive the full plan towards the end of next week.”

London & Valley Water, led by chair designate Mike McTighe, said the turnaround effort would focus on basic service improvements. “Our core focus will be on improving performance for customers, maintaining the highest standards of drinking water, reducing pollution and overcoming the many other challenges Thames Water faces,” McTighe said.

He added: “This turnaround has the opportunity to transform essential services for 16 million customers, clean up our waterways and rebuild public trust.”

Thames Water itself welcomed the proposal, insisting it showed a commitment to resolving its deep-rooted problems without relying on taxpayer support. “Today’s announcement underscores the London and Valley Water consortium’s commitment to fixing TWUL’s underlying challenges without relying on taxpayer funding,” a spokesperson said.

“We look forward to working with stakeholders to deliver a market-led solution that benefits customers and the environment.”

The financial hole left by years of mismanagement, debt build-up and mounting infrastructure failures has placed Thames Water under intense scrutiny. The rescue plan, if accepted, could set the course for a private-sector solution — but it will also mean consumers footing a hefty bill while receiving fewer improvements than originally promised