23 January 2025

Open Editor's Digest for free

The UK Government has approached consultancy firms about taking on the role of special administrator, in a sign that ministers are preparing for imminent renationalisation. Thames water.

Consulting firms, including Teneo, Interpath and EY, are among potential candidates to run the so-called special management system, according to people familiar with the process. A SAR is a temporary measure designed to keep services running, and pay suppliers and employees, in the event that a company collapses.

“We are prepared now, and we can set up a single price (SAR) today, if we have to,” one official said. “And by the way, preparing for a SAR is also the most powerful tool we as a government can have to make sure that another market, private sector-led solution is found.” “

Thames Water is struggling under the weight of its £19bn debt and has warned it will run out of money in March unless the High Court signs off on a deal. A controversial £3 billion loan At a hearing in early February.

Another government official said there had been “informal engagement” with some consulting firms for a private management role, but there was no formal interview process.

Steve Reid, the environment secretary, said last October that he had “ruled out nationalisation”.

Officials insist that moving the company to the SAR would not technically be nationalization despite it being major state intervention.

But putting Thames Water into special administration may be inevitable if a court blocks the loan agreed with its senior creditors, or if the company runs out of money earlier than expected. The £3bn loan is controversial because it will carry an interest rate of 9.75 per cent, as well as fees and incentives for managing existing Thames Water.

The agreement is being challenged by a separate group of smaller creditors to Thames Water – who have proposed a cheaper deal – and by environmental campaigners who argue that… The company will be better off In private administration.

The loan would buy the company time to raise at least £3bn of equity in a parallel operation. Companies including Castle Water, Covalis and CKI Infrastructure are among the investment groups Line up To submit potential bids for the benefit.

Bidders and creditors are waiting to hear if the company is appealing to the Competition and Markets Authority over regulator Ofwat's decision last month on the level at which Water companies can raise customers' bills Over the next five years. Thames Water has not yet decided whether it will appeal Ofwat's decision to the CMA, according to people familiar with the matter.

Aufat said this The Times will be allowed To increase bills by 35 per cent – far less than the 59 per cent increase it sought – which would take average bills from around £436 now to £588 between now and 2030.

The Department for Environment, Food and Rural Affairs, Thames Water and Ofwat did not respond to requests for comment.

EY, Teneo and Interpath declined to comment.

In an update to the market on Wednesday, Julian Gething, the company's chief restructuring officer, said: “Our plan delivers for clients and stakeholders by unlocking up to £3bn of new money and securing a total of £3.5bn of debt extensions over the next two years and issuances. Cash, so we can continue to invest the billions of pounds needed to improve the resilience of our network.

“We believe this is the only viable solution to enable the equity investment required to provide long-term stability and certainty and will not impact customer bills.”

The government's selection of an administrator may be complicated by potential conflicts of interest. Teneo is already acting as an advisor to Thames Water and has received fees worth £5m since August 2023. It has also received at least £60m from Thames Water's own administration. The power supply bulb has collapsedAccording to the National Audit Office.

It also wrote a report to the High Court supporting a £3bn senior creditor loan, while Interpath wrote a separate report on behalf of junior creditors.

Sir Dieter Helm, professor of economic policy at Oxford University, said a SAR would enable Thames Water to focus on restructuring and delivering improvements, rather than negotiating a deal with creditors.

Leave a Reply

Your email address will not be published. Required fields are marked *