Thames Water restructure plans a ‘bridge to nowhere’, MP’s barristers tell court

Thames Water should be placed into administration as plans to restructure the struggling utility are a “poor short-term fix” and a “bridge to nowhere”, an MP’s barristers have told the High Court.

The firm, England’s largest water company, is set to run out of money by the end of March and is seeking the court’s approval of plans to inject up to £3 billion to keep it afloat, or risk entering special administration.

The restructuring, known as the company plan, would effectively guarantee Thames Water can keep operating until 2026 by providing £1.5bn of funding with a 9.75% interest rate, with a further £1.5bn potentially available, ahead of a substantive restructuring later this year.

But barristers for Charlie Maynard, the Liberal Democrat MP for Witney in Oxfordshire, told the court in London on Monday that allowing the utility to enter administration was a “better and fairer course” which served “the public interest and customers’ interests”.

In written submissions, William Day, for Mr Maynard, said the company plan “does not confront Thames Water’s financial difficulties” and instead was a “sticking plaster”.

He said: “The envisaged bridge finance aggravates rather than mitigates the Thames Water debt doom loop.

“It comes at (an) egregious cost; is likely to be exhausted mainly in payment towards Thames Water’s existing debt obligations, rather than being deployed in the business; and provides a bridge to nowhere.”

He continued: “The terms of the restructuring plan are a poor short-term fix and not financially sustainable in the mid or long term for Thames Water.”

Thames Water serves around 16 million customers, almost 25% of the UK’s population, but it is in about £16bn of debt and needs £3.3bn over the next five years to keep running.

It has also been at the centre of growing public outrage over the extent of pollution, rising bills, high dividends, and executive pay and bonuses at the UK’s privatised water firms.

The court has heard that it will run out of money by March 24 if the restructuring is not approved, with the company plan approved by creditors holding more than 75% of its Class A debt, which is worth about £11.5 billion and is the least risky class of bonds in its debt pile.

But Mr Day claimed Thames Water “has put no evidence before the court as to customer support” for the restructuring plan, which he said, “must be because the company considers customer support to be irrelevant and also because there is none”.

He said: “(Thames Water) has failed to show how the restructuring plan is in the public interests or customers’ interests. On the contrary, the evidence shows clearly that it is not in their interests.”

Mr Maynard defeated former Tory solicitor general Robert Courts at the last general election, with his seat also previously held by former prime minister, Lord Cameron.

The court was told he had received “expressions of support” from 34 charities and campaign groups, and 25 MPs in Thames Water constituencies.

In a statement, he said: “Thames Water is running out of money, it is operating in breach of its licence, it is unable to pay its debts and its customers are suffering for it.

“The deal the creditors are pushing for serves their interests only; it is a short-term fix at the expense of the company, Thames Water customers and UK taxpayers.

“Households in my constituency and so many others have no choice but to pay towards Thames Water’s debts in their bills.

“Around a third of customer bills are already being spent on paying down the interest on the water company’s debts. This cannot continue.”

A smaller group of creditors also opposes the plan being approved and is instead proposing an alternative known as the “B plan” which they claim would provide the company with the same funding on better terms.

Julian Gething, chief restructuring officer at Thames Water, said: “Our plan remains the only implementable solution to putting the business on a firmer financial footing.

“Its approval will not affect customer bills, but will unlock billions of pounds for investment in our network, fixing pipes, upgrading our sewage treatment works and maintaining high-quality drinking water.

“Any suggestion the plan will impact bills is an untrue and misleading claim that risks needlessly worrying our customers.

“This plan will not lead to any increases in customer bills. Ofwat has already determined the cost of bills for the next five years.”

The hearing before Mr Justice Leech is set to conclude on Thursday, with a judgment expected in writing later.