Open Editor's Digest for free
Roula Khalaf, Editor of the FT, selects her favorite stories for this weekly newsletter.
The UK government has met with advisers about taking on the role of a special regulator in a sign that ministers are gearing up for the country's recovery. Thames water.
Consultancies including Teneo, Interpath and EY are among the potential candidates for the so-called special administration regime, according to people familiar with the process. SAR is a temporary measure designed to keep services running, and suppliers and employees paid, in the event of a company collapse.
“We are ready now, we could do another (SAR} today, if we had to,” said one official. “Obviously, being ready for a SAR is also the most powerful thing for us as a government to ensure that another market. -led solution, obtained privately.”
Thames Water is struggling under £19 billion and has warned it will run out of money by March unless the High Court signs it off. controversial £3bn loan at the hearing in early February.
One government official said there had been “informal negotiations” and some suggestions about the role of a special administrator but no formal interview process.
Steve Reed, the environment secretary, said in October that he had “rescinded the nationalisation”.
Officials insist that taking over a company in the SAR will not be national unless it is a major government intervention.
But putting Thames Water into special administration may be inevitable if a court blocks a loan deal with senior investors, or if the company runs out of money sooner than expected. The £3bn loan is controversial because it will carry an interest rate of 9.75 per cent plus fees and incentives from the existing Thames Water management.
The deal is being challenged by a separate group of small lenders to Thames Water – who have proposed a lower deal – and environmental campaigners who object to it. the better off the company will be in a special administration.
The loan will buy the company time to raise at least £3bn of equity in the same process. Companies including Castle Water, Covalis and CKI Infrastructure are among the investment groups to line up to place potential bids for assistance.
Consumers and creditors are waiting to see if the company appeals to the Competition and Markets Authority about the decision of the Offat regulator last month at the stage where Water companies can increase customer bills in the next five years. Thames Water has yet to decide whether to appeal Offat's decision to the CMA, according to people with knowledge of the matter.
Owat said The Thames will be allowed raising debt by 35 percent – much less than the 59 percent increase he wanted – taking average debt 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 a marketing update on Wednesday, the company's chief restructuring officer, Julian Gething, said: “Our plan provides customers and stakeholders with the unlocking of up to £3 billion of new capital and securing an additional £3.5 billion of further debt growth. over the next two years and funding, so we can continue to invest the billions of pounds needed to improve the resilience of our network.
“We believe that the only solution that can be implemented is to make the necessary equity investment to provide stability and certainty in the long term and will not affect consumer debt.”
The government's selection of a director can be complicated by conflicts of interest. Teneo is already a consultant to Thames Water and has received £5mn in fees from August 2023. A fallen power bulbaccording to the National Audit Office.
It also wrote a statement to the High Court supporting a £3bn loan for senior lenders, while Interpath wrote a separate statement on behalf of smaller lenders.
Sir Dieter Helm, a professor of policy economics at Oxford University, said the SAR would allow Thames Water to focus on restructuring and delivering improvements, rather than negotiating with creditors.