Thames Water is reportedly in talks with Government ministers and water regulator Ofwat about contingency plans for the business.
There are suggestions that Thames Water could be placed into a special administration regime (SAR) - the same process used when energy supplier Bulb collapsed.
Thames Water is the biggest UK water supplier with approximately 15 million customers in London and the South East but is said to be struggling with a £14billion debt pile.
The firm has been under pressure of its handling of sewage contamination and leaks.
Here, our Head of Business Graham Hiscott explains everything you need to know if you're a Thames Water customer.
Q: Why is Thames Water in trouble?
A: Different reasons but a millstone around its neck is debt, a lot of it, said to be £14billion.
Reports emerged in March that the company was facing crunch talks about its ability to meet its debt repayments.
Thames was this week said to be trying to raise £1billion from shareholders.
Should the water companies be renationalised? Vote in our poll HERE to have your say.
Q: Is Thames Water an isolated case?
A: No, far from it.
Industry regulator Ofwat says that, by March last year, the industry had amassed debts of more than £60billion.
Customers are paying on average £80 or 20% of their water bill towards servicing those debt and rewarding shareholders.
Q: Why are suppliers so loaded with debt?
A: It wasn’t always this way.
It was former Tory Prime Minister Margaret Thatcher who sold off our water suppliers.
Ten regional water authorities floated on the stock market in 1989.
They were sold debt-free - the government wrote off all debts amounting to £5billion - and granted firms a further £1.5billion of public money, known as a “green dowry”.
The Government kept a “golden share” to stop an individual or company taking full control.
But that was dropped in 1994, triggering a shopping spree by foreign buyers.
The subsequent years saw many companies taken private, and change hands, often involving complex deals that lumbered the water firms themselves with huge debts.
Q: But if that’s been the case for a while, why is there an issue now?
A: Two words - interest rates. Or to be clearer, a sharp rise in borrowing costs.
When rates were low, it was easy to finance eye-popping debts,
But as the GMB union has said: “The chickens are coming home to roost.”
Dieter Helm, a professor of economic policy at the University of Oxford, says: “In effect, the companies mortgaged their assets and then paid out the cash from the mortgaging in the form of dividends, share buybacks and special dividends.
“There followed the great financial engineering.’
Rising interest rates threaten to expose those water companies under the biggest financial strain.
Q: Who have been the winners?
A: Those investors that swooped, bought up the suppliers, loaded them with debt, then raked in bumper payouts.
Analysis by the Guardian found the main water companies in England have paid dividends of £65.9billion up to last year.
Rules have come in more lately designed to restrict payouts, but it smacks of closing the stable door after the horse has bolted.
Q: Who have been the losers?
A: Critics will point to decades of under investment that have resulted in polluted rivers, raw sewage pumped into coastal water, and a dismal track record of fixing leaks.
Gary Carter, the GMB union’s national officer, said: “Forty years since privatisation and we’ve seen almost no investment in infrastructure and the workforce while shareholders and fat cats drain fortunes from the industry.”
Trade body Water UK said, on the 30th anniversary of privatisation in 2019, that there had been nearly £160billon investment.
It also claimed: “At around £1 a day, average bills today are broadly the same as 20 years ago once inflation is taken into account.”
Q: What might happen next to Thames Water?
A: That’s a key quarter question given it supplies 15 million customers across England and the south east.
Talks are said to be at an early stage about plans to potentially place Thames Water into a special administration regime.
That would effectively mean the company ends up in temporary public ownership.
A similar process was used by the government after the collapse of energy supplier Bulb in 2020.
In the case of Bulb, its customers are now in the process of being transferred to new owner Octopus Energy.
A special administration regime has not been used in the water industry before, so it is unclear how it would work, and what interest there would be from buyers.
Q: I’m a Thames Water customer, is my supply at risk?
A: No, there is no question of that at this stage and a special administration regime, were it to be used, is designed to ensure continuation of supply.
Q: What are the alternatives to how the industry is run now?
A: Polls show most of the public think the sector should be renationalised.
A YouGov survey last year found 63% of people back doing so.
Support is highest among Labour voters (68%), against 28% of Tory supporters.
Q: What are Thames Water, Ofwat and the Government saying in response?
A Government spokesperson said: “This is a matter for the company and its shareholders.
“We prepare for a range of scenarios across our regulated industries - including water - as any responsible government would.
“The sector as a whole is financially resilient. Ofwat continues to monitor the financial position of all the key water and wastewater companies.”
An Ofwat spokesperson said: “We monitor the financial position of all the key water and wastewater companies.
“We have been in ongoing discussions with Thames Water on the need for a robust and credible plan to turn the business around and transform its performance for customers and the environment.
“We will continue to focus on protecting customers' interests.”
Thames Water said: "As envisaged in June 2022, Thames Water received the expected £500million of new funding from its shareholders in March 2023 and is continuing to work constructively with its shareholders in relation to the further equity funding expected to be required to support Thames Water's turnaround and investment plans.
"Ofwat is being kept fully informed on progress of the company's turnaround and engagement with shareholders.
"Thames Water remains focused on delivering for its customers, the environment and stakeholders.
"Thames Water continues to maintain a strong liquidity position, including £4.4billion of cash and committed funding, as at 31 March 2023."
