LONDON: Britain's largest water supplier Thames Water, which is drowning in debt, won a financial lifeline Thursday as regulators allowed it to massively hike customers' bills, though by less than the company demanded. Water regulator Ofwat said Thames Water, which supplies around 16 million homes and businesses in London and elsewhere in southern England, could increase average bills by 35 percent between now and 2030. Thames, riddled with £16 billion-worth ($20 billion) of debt, is in desperate need of funds to update its infrastructure.
The company and its UK peers have recently been hit with heavy fines over failures to plug raw sewage discharges in rivers. Thames customers are set to see average annual water bills rise to £588 by 2030. It falls short of the 59-percent hike the company requested as it negotiates a lifeline loan from creditors to keep operating beyond March. Approval of a £3 billion debt plan could help save it falling into public hands. Responding to Ofwat's decision Thursday, Thames Water said in a statement that it "will take time to review the determination in detail".
'Right to be angry'
Ofwat on Thursday also fined the company £18.2 million over its decision to pay "unjustified" dividends to shareholders while performance suffered. "The public are right to be angry," Environmental Secretary Steve Reed said following the regulator's announcements. "This Labor government will ring fence money earmarked for investment so it can never be diverted for bonuses and shareholder payouts," he added.
His comments came as the government launched an inquiry into reforming the water sector. Environmentalists have increasingly voiced outrage at the rise in pollution across UK waterways, and have pointed the finger at privatized water companies. It's not yet clear whether Ofwat's decision to allow Thames to hike bills will help strengthen the company's performance enough for it to avoid a state bailout.
Such a rescue would be a blow to the government in the face of tight public finances. Thames Water - owned by a consortium of shareholders including Canada's Ontario Municipal Employees Retirement System and the British Universities Superannuation Scheme - has recently attracted interest from private buyers. Infrastructure investor Covalis Capital proposed an upfront buyout offer of £1 billion, with the potential to bring in French utility giant Suez. Thames Water's latest earnings revealed a loss of £190 million for the six months to the end of September. Its turnover increased 10 percent thanks to an increase in customer charges. - AFP