Credit rating for Thames debt falls after "subdued" performance

Credit ratings agency Standard & Poor’s Global Ratings (S&P) has revised its outlook for Thames Water’s debt from stable to negative in a reflection of the firm’s “largely subdued” performance and current financial pressures.

S&P, in its research update warned Thames’ “relatively high leverage… limits its ability to absorb any future additional weakening in profitability.”

The agency said it “notes positively the strong reduction in dividend distribution and the long-term build-up of regulated capital value,” but it went on to add: “higher indexation of inflation-linked debt instruments stemming from higher inflation rates and below-average operational performance” had increased pressure on Thames finances during the year to March 2018.

looking forward S&P said “limited headroom and potential future pressure from the next regulatory period” may cause Thames to “struggle to maintain its credit metrics commensurate with its current ratings.”