Thames: it’s not over yet

Despite the siren voices of the press indicating that Thames may have reached the end of the road for private ownership and be taken into the Special Administration Regime (SAR), it appears that potential new owners won’t give up on Thames yet. Having been criticised for narrowing its options by allowing only one prospective owner to undertake due diligence, the board must now allow others to have a look at the books.

CKI has written to Sir Adrian Montague, chair of Thames, asking to be given access to due diligence materials. With a detailed knowledge of UK water through its ownership of Northumbrian Water, CKI said it might be in a position to table a bid in a few weeks with a view to take control. Some MPs are nervous about the prospect of CKI acquiring another UK utility. The Hong-Kong listed company already owns Northumbrian Water, Northern Gas Networks and UK Power Networks.

Meanwhile, Thames’ A creditors have submitted what was described as a £17bn proposal to recapitalise the company. The bondholders are initially offering £3bn of new equity and £2bn of debt funding and the leadership of Mike McTighe. This will mean, they said, “complete loss for existing shareholders, and several billion of debt write-downs to restore financial resilience and improve services for the benefit of customers, employees and the taxpayer”. This may mean complete losses for junior B debt and holding company creditors. The senior creditors’ plan is designed to allow £20.5bn of targeted operational expenditure over the next five years. The aim is to reduce gearing to below 60%. This will then allow access to new debt and, once Thames is stabilised, could eventually lead to a stock market relisting after 25 years of utility and private equity ownership.

Creditors working on a long-term plan for Thames’ turnaround also want relief from recently-confirmed penalties from Ofwat, and protection from future fines by the Environment Agency. Fitch currently estimates that the water sector will face £900m in fines. Government agency inflexibility over any special treatment for Thames led to the exit of the previous shareholders.

The creditors are asking for “ambitious, but realistic, targets to be set based on achievable compliance and what Thames Water is currently able to physically deliver”. This would then be a “clean slate that would see Thames Water and investors held to account to deliver an ambitious trajectory for the company’s return to compliance.” Customer bills would remain in line with the final determination until 2030. All this might be in place by July, subject to negotiation.

Government has the opportunity to provide a stay of execution to keep Thames from the SAR. This is undoubtedly special treatment. However, in the wider context of restoring the reputation of the UK water industry and the attractiveness of UK infrastructure, it may be a necessary pill for Thames’ peers and the Government to swallow.

• The Environment, Food and Rural Affairs Committee continues to seek clarity over Thames Water executive bonuses. Having received replies to letters from Committee chair Alistair Carmichael to Thames chair Sir Adrian Montague and chief executive Chris Weston, Carmichael has written three further letters – to Sir Adrian as well as to Ofwat and Defra – seeking answers on the legitimacy of declared payments.

He explained: “The general public have recently been informed that the Government has acted quickly to ban bonus payments to water company CEOs and CFOs and that any bonuses paid out since April 2024 will be clawed back. We have now learned that 21 members of Thames Water’s senior management team, not including their CEO and CFO, received payments additional to their salary, in April 2025, at the not inconsiderable rate of 50% of their base rate of pay. Thames Water have stated in a letter to us that they do not intend to recover this money. They also say that the retention payments scheme has been ‘paused’.

“As a Committee, we are trying to seek clarity as to whether these payments fall within the remit of the Government’s ban and will be recouped, given that they were not paid to the company’s CEO or CFO and are termed by Thames Water as ‘retention payments’ rather than bonuses. We are also asking whether Defra and Ofwat were aware of these payments and what undertakings they have received from Thames Water about the pausing or withdrawal of the retention plan.

“Given that the plan includes two further retention payments, including 200% of base salary due to be paid to these 21 individuals in June 2026, it is vital that Thames Water, Defra and Ofwat are clear with us all about what exactly is going on.”

In the exchanges, Thames also shared that its legal fees to secure the recent emergency funding reached £67.6m and that it has spent £14.6m on marketing over the past five years.