The Dutch bank ING and two Chinese state-owned lenders could play a crucial role in deciding the fate of beleaguered Thames Water, it has emerged.
The banks are expected to agree an extension on a £190m loan to the parent company of Britain’s biggest water supplier, which is due to be repaid at the end of this month.
The group of lenders to Kemble Water Finance include ING, Allied Irish Banks (AIB) and the Chinese state-owned Bank of China and Industrial and Commercial Bank of China (ICBC), the Financial Times and Sky News reported.
Last week, Thames’s shareholders refused to stump up £500m that had been expected by the end of March, some of which was earmarked to pay the Kemble loan.
The announcement raised the prospect of Thames, which has 16 million customers, being temporarily nationalised if it slips into a government-handled administration. Rishi Sunak appears reluctant to pursue this route, although a government project team is examining contingency plans for Thames’s collapse.
Thames has said the industry regulator, Ofwat, is being too stringent, making the company “uninvestible”. It wants to secure significant bill increases, lower environmental fines and the ability to pay dividends up to Kemble to service its debts.
Kemble said on Thursday it could not repay the loan. Sources said the parent company was likely to secure an “amend and extend” agreement, allowing it to repay the loan at a later date. If Kemble defaults, the lenders could become shareholders in Thames Water.
Thames is ultimately owned by a group of shareholders led by Canadian pension fund Omers and including the UK university pension scheme USS, the investor Hermes, the China Investment Corporation and a subsidiary of the Abu Dhabi sovereign wealth fund.
China’s role in UK infrastructure has been under the spotlight since telecoms groups were forced to strip out Huawei equipment from the UK network and Chinese backers of the Sizewell C nuclear power project were eased out amid security fears.
Thames Water’s chief executive, Chris Weston, is due to meet union leaders on Thursday amid concerns over the future of Britain’s biggest water company.
Representatives from the GMB, Unison and Unite unions will meet at the company’s headquarters, Clearwater Court in Reading, this afternoon.
Ahead of the meeting, the GMB national officer Gary Carter said he would “demand there are no cuts to work force numbers – or terms and conditions”. He said: “Any cost-cutting measures being considered by Thames will only be a sticking plaster and will not address the root cause of the company’s problems – a lack of investment by shareholders stretching back decades.”
Fitch Ratings, an influential debt rating agency, said on Thursday it had downgraded Kemble’s debt. Fitch wrote that even if the lenders do agree to extend the parent company’s debts, it would probably still constitute a default. What happens after that would depend on the terms of the debt, and what security the lenders demanded in exchange for the money.
The rating agency said: “We believe that a downgrade to [restricted default] has become highly likely. Even assuming that lenders will agree to amend and extend the £190m loan due on 30 April 2024, this agreement would probably constitute a distressed debt exchange under our criteria.”
The Guardian revealed this week that anger over water companies repeatedly dumping sewage had led to widespread abuse of frontline workers in the industry, with the GMB reporting that one in three UK water employees it surveyed had been verbally abused.
Thames Water, ING, AIB and Kemble declined to comment. Bank of China and ICBC were contacted for comment.
