Negotiations between Thames Water's senior creditors and regulator Ofwat on a rescue deal have been ongoing for nine months, with an outcome still thought to be weeks away. The company has been trying to stave off financial collapse for more than two years under £17.6bn in debt, and its shareholders declared the company 'uninvestible' and accepted their shares were worthless two years ago.
The updated rescue proposal includes an increase in fresh equity injection from £3.15bn to £3.35bn. The day-one debt facility has been boosted by £1bn to £3.25bn. Ofwat has insisted creditors underwrite a further £3.3bn debt facility in case Thames Water cannot raise borrowings from the market on commercial terms by circa 2028. Senior creditors have been beaten back to a 30% haircut on their Thames Water debt from an initial proposal of 20%.
Thames Water is negotiating with creditors over a separate £10bn rescue plan that would involve paying off hundreds of millions of pounds in fines for leaks and pollution. According to major media, Ofwat is preparing a deal that would allow Thames Water to avoid any new fines over the next four years in exchange for a commitment to invest new cash in the business. The deal would involve 'undertakings' in place of financial penalties for Thames Water until 2030, enabling the utility to commit to fixing issues that caused breaches rather than paying a fine.
Thames Water's bosses tried to sell the company last year, but preferred bidder KKR pulled out at the last minute. CK Infrastructure (CKI) wrote to Ofwat in October to insist it would bid for Thames Water if there was a competitive sale process. CKI has owned Northumbrian Water since 2011, serving 2.7 million customers, compared to Thames Water's 16 million. Some MPs have raised concerns about CK Infrastructure's links to China.
Thames Water has a £20bn debt pile and is in a race against time to reach an agreement before it runs out of money once more in October. The offer from creditors, including Elliott Management and Silver Point Capital, first went to Ofwat for approval in June 2025. Ofwat must put any deal out for a three-month public consultation.
As part of the offer, a proposal for senior creditors to take a 30% writedown on their debt and for junior creditors to lose all their cash will have to be tested in the High Court. Thames Water has managed to stay afloat through a £3bn loan from creditors at a 9.7% interest rate, expected to cost around £800m in interest in total.
Customers face a 37% increase in bills, before inflation, by 2030. Thames Water has a deal with Ofwat that enables it to raise prices further if it can find the supply chain to deliver work.
The government has pushed for a private sector-led solution to avoid nationalisation or a special administration regime (SAR). Thames Water would still face Environment Agency fines and legal cases under the deal, while pollution, leakage, and other performance targets are being individually renegotiated, to be suspended or 'significantly modified'.