Thames Water: Ofwat plans to appoint independent monitor after ratings downgrades

Agreeing to a monitor is one of four commitments Ofwat wants Thames to comply with, which also include developing a “suitable” business plan to turn around the struggling business.

The watchdog said Thames must agree to “taking the steps required to deliver an equity raise”, and appointing new non-executive directors to its board.

Ofwat chief executive David Black said: “We are clear that Thames Water needs to remedy its licence breach, turn around its operational performance, and secure backing from investors to restore its loss of investment grade credit rating.

“These enforceable commitments will include our putting an independent monitor into the business, to report back to us on what is happening to drive meaningful change in performance, and to ensure appropriate expertise is added to their board.

“We will continue to monitor progress very closely and will not hesitate to take any further action if necessary.”

Under the plan, which is currently up for consultation, the commitments would remain in place until the company regains two investment grade credit ratings.

Moody’s downgraded its rating for Thames to “junk” status on July 24, indicating that the credit agency thinks the utility company is likely to default on its debt and may add to its financial pressures.

And on July 31, S&P downgraded Thames Water’s Class A debt rating to BB and its Class B debt rating to B.

The measures come as part of a previously announced “turnaround oversight regime” floated by Ofwat for Thames last month.

The regulator also opposed the company’s planned 44% rise in consumer bills over the next five years, telling Thames it should instead increase average yearly bills by 23% to £535 over the period.

A spokesman for Thames Water said: “We note that Ofwat is minded to accept the undertakings we have proposed, but understand the need for them to consult before doing so.

“We remain focused on working with Ofwat to secure an investible PR24 determination (the outcomes framework for the 2024 price review), which is key to attracting equity into the business.”