Thames Water has been accused of “misleading” customers after telling them that just a few pennies in every pound spent on their bills is paid to its lenders.
The debt-laded firm is Britain’s biggest water company, serving 16 million customers in London and the south-east of England. It has sent a breakdown of its costs in bills to customers, including spending 48p of every pound on infrastructure, 20p on the supply and treatment of water, and 3p to its lenders.
However, critics of the company said Thames was playing down the true cost of its £14bn debt pile after analysis by the Guardian found the firm had on average spent almost 28% of its annual revenues servicing its debts between 2018 and 2023. Nearly all of Thames’s revenues come from customer bills.
In its bill breakdown, Thames said: “To invest in our network, we borrow money at efficient rates while keeping your bills as low as we can.”
In a similar breakdown in the company’s annual report, it included the 3p figure alongside a caveat that explained it was based on “net cashflows”, excluding new loans raised, repayments of borrowings and other financing costs.
The campaigner and former Undertones singer Feargal Sharkey said: “It is misleading. If one lesson has been learned in recent years, it’s that water companies cannot be trusted. Whether it’s about how they finance their debt or how much sewage is being dumped.”
Andy White, a senior policy leader at the Consumer Council for Water, said: “Households have a right to expect clarity over how their money is being spent and transparency on bills is essential to rebuilding trust in the sector, which is the lowest it’s been for more than a decade.
“The next five years could see people facing some of the largest ever rises in water bills and companies need to demonstrate to their customers they are getting value for money.
“Regular and clear information is imperative but at present one in five customers feel the communication from their water company is poor.”
The Guardian analysis found that at Thames, the equivalent of 27.8% of revenue was spent servicing its £14.7bn debt pile on average over the past five years.
Thames’s finances have been under close scrutiny after it emerged its parent company had been warned by its auditors that it could run out of money by April if shareholders did not inject more cash into the company. Thames needs to repay a £190m loan due in April.
Last month, the Financial Times reported that government officials have in place contingency plans in the event of a collapse, under the name Project Timber.
In response, Thames’s chief executive, Chris Weston, urged staff “not to allow yourself to be distracted by any media coverage”. In an internal memo, seen by the Guardian, he asked them to “instead, continue to focus on delivering essential services to our 16 million customers and supporting our turnaround plan to improve our performance”.
The situation has escalated tensions with the industry regulator Ofwat, which is in the process of assessing five-year business plans for water companies in England and Wales.
Thames hopes to raise bills by 40% in the five years to 2030 – on top of a £15 rise in April – to pay for £18.7bn of upgrades to its ageing infrastructure. The company is reportedly lobbying for lower fines for breaches. Ofwat is also studying whether a £37.5m dividend paid to Thames’s parent company in October is a breach of its licence conditions.
On Monday, the government said a group of English water companies had agreed to spend £180m on accelerating efforts to tackle sewage dumping. However, Thames did not participate in the drive, to the disappointment of government.
Thames Water declined to comment.
