Ofwat announced on Wednesday that they plan to appoint an independent monitor to supervise Thames Water’s turnaround plan. This decision came after Thames Water’s credit rating was downgraded twice in July, leading to a breach of its operating license. Ofwat has outlined four commitments that Thames Water must adhere to, including developing a viable business plan, raising equity, and appointing new non-executive directors to the board.
David Black, the CEO of Ofwat, emphasized the importance of Thames Water addressing its license breach, improving operational performance, and regaining investor confidence to restore its credit rating. The appointment of an independent monitor is intended to drive meaningful change and ensure the necessary expertise is added to the company’s board. Ofwat will closely monitor Thames Water’s progress and take further action if needed.
Moody’s downgraded Thames Water’s rating to “junk” status, indicating a high risk of default, while S&P downgraded its debt ratings. These downgrades have put additional financial pressure on the utility company, which is already facing a funding crisis with over £15 billion in debt. Thames Water stated that it can only continue trading until May 2025 without a significant cash injection.
In response to sewage spills, Ofwat proposed fines totaling £168 million for three major water companies, with Thames Water facing a £104 million penalty. These penalties are part of Ofwat’s investigation into the industry’s management of wastewater treatment and sewer systems, aiming to reduce pollution in rivers. Thames Water expressed its commitment to working with Ofwat to attract equity into the business and secure an investible PR24 determination.
The implementation of an independent monitor and the proposed fines are part of Ofwat’s efforts to hold water companies accountable for their performance and financial management. As Thames Water navigates its funding crisis and works towards regaining investor confidence, the support and oversight provided by Ofwat will be crucial for the company’s future success.
