Moody's Investors Service has downgraded Thames Water’s parent company Thames Water (Kemble) Ltd. for the second time in less than six months.
Moody's Investors Service has today downgraded to B3 from B2 the backed senior secured rating of the GBP400 million medium term notes due 2026, issued by Thames Water (Kemble) Finance PLC (Kemble).
The rating action on Kemble reflects Moody's view that the risk of a disruption to dividend payments by Kemble's core operating subsidiary Thames Water has increased - despite Thames Water not currently being in breach of any explicit lock-up conditions under its financing structure nor licence.
The ratings agency is flagging up “materially” increased risk that water sector regulator Ofwat will block dividend payments from the troubled water company to Kemble.
Under the terms of Thames Water’s licence, as the appointed company it must ensure that it or any associated company which issues corporate debt on its behalf maintains, at all times, two Issuer Credit Ratings - investment grade ratings from two different credit rating agencies.
In July Moody's Investors Service downgraded to B2 from B1 the backed senior secured rating of the £400 million medium term notes due 2026, issued by Thames Water (Kemble) Finance PLC (Kemble). The outlook remains negative.
In October the regulated operating company Thames Water paid £37.5 million in dividends to its holding company Kemble Water Finance.
Details of the payment were set out in Thames Water Utilities Ltd Interim results for the six months period to 30 September 2023 published on 5th December. On 6th December Ofwat then confirmed that it it was looking into the payment and asked for the information to be provided this month. Ofwat said it would need to thoroughly review the information provided by the company before determining the appropriate action to take.
Because of the further tightened regulatory scrutiny of Thames Water's distributions, Moody's believes that "the uncertainty around the operating company's ability to make necessary distributions has increased materially."
The latest downgrade was prompted by the regulator’s request for information – Thames Water Kemble Finance PLC has now been downgraded to a new rating by Moodys of B3.
According to Moody's Rating scale, obligations rated B are considered speculative and are subject to high credit risk. Obligations for the next rating below that – Caa – are judged to be of poor standing and are subject to very high credit risk.
Thames Water and its parent company Kemble Water is in debt to the tune of some £18 billion. The utility has £1.4 billion of external debt maturing in the coming years, including £190 million in April 2024. Currently the utility does not have the funding to cover the latter amount.
On 12 December the CEOs and Chairs of Thames Water and Ofwat endured a grilling by the House of Commons EFRA Select Committee. Both organisations came in for intense questioning about the state of the water company’s finance.
Questioned on the £37.5 million dividend payment, Thames Chairman Sir Adrian Montague suggested that a failure to give dividends “would curtail or derail the possibility of receiving further equity from our shareholders”.
On 12 December Thames Water Utilities Finance Plc also separately announced that Thames Water has been notified by Ofwat that it has now reached the next stage of its investigation into the management of its sewage treatment works and wider networks. If Ofwat ultimately makes a finding of breach sufficient to warrant a fine, as part of its enforcement powers, the regulator can impose a financial penalty on companies, the value of which can be up to 10% of relevant turnover. On 18th November 2021 Ofwat announced the investigation into all water and wastewater companies in England and Wales.
On 15 December Thames Water announced the appointment of Chris Weston as Chief Executive Officer of Thames Water with effect from 8 January 2024, replacing interim Co-CEOs Cathryn Ross and Alastair Cochran.
Click here for more information from Moody's Investors Service
Barhale has completed work on two separate Rapid Action Taskforce Spills projects it is carrying out for Severn Trent.
Börger UK, which has firmly established itself as a leading pump brand since it was set up in Staffordshire in 2004, has moved into bigger, brand-new premises in Shrewsbury.
HUBER Technology UK & Ireland are inviting people to register for their March webinar where they will be providing information about HUBER water intake screens for municipal and industrial applications.
Sulzer has launched a new global Center of Excellence (CoE) for Water Treatment Solutions - the CoE consolidates Sulzer’s wastewater treatment expertise in a unified and global manner.
Hear how Scottish Water has completed its £235 million Ayrshire Glasgow Resilience Project - customers across Greater Glasgow, Ayrshire and East Renfrewshire will now benefit from a more secure and resilient water supply.
Hear how United Utilities is accelerating its investment to reduce spills from storm overflows across the Northwest.
Find out more about the remarkable career opportunities on offer at WSP - scroll down to watch the inspirational video.