Ofwat accepts Thames Water undertakings following credit rating licence breach

Following a short consultation, Ofwat has accepted, effective immediately, the series of commitments put forward by Thames Water, after it breached its licence requirement to hold two investment grade credit ratings.

Thames made four principal commitments:

• Independent monitor – Ofwat will be able to appoint an independent monitor with access to company information, to report back on Thames’ progress, including on its transformation plan and towards restoring the investment grade credit ratings and compliance with Condition P26.

• Turnaround plan – To develop and deliver a business plan to achieve turnaround, secure access to investment markets and establish long term financial resilience. This is separate from Thames’ existing three-year operational turnaround plan which is focused on shorter term practical improvements.

• Equity raise – Using all reasonable endeavours to raise equity, on a timetable agreed with Ofwat.

• Board appointments – Appointing two new independent non-executive directors to oversee the equity raise, and a member of its senior leadership team to monitor compliance with the undertakings and liaise with both Ofwat and the independent monitor.

The undertakings, which are in lieu of enforcement action, will remain in place until Thames regains two investment grade credit ratings. 

Ofwat reported that 12,800 of the 13,000 responses it received to the consultation – which ran for just over a week – were driven by campaigns and called for it to impose financial penalties on Thames Water and/or to place it into special administration.