Thames Water’s debts have continued to grow and the company is reporting a 40% rise in pollution incidents with the publication this morning of its half year results for the six months to 30 September 2024.

For the six month period ended 30 September 2024,Thames Water Utilities Finance Ltd(TWUF) the financing subsidiary of Thames Water, made a loss before tax of £1,840.4 million (30 September 2023: profit before tax of £166.1 million). The loss was primarily due to £1,912.0 million expected credit losses on intercompany loans receivable (30 September 2023: £nil), partially offset by the margin earned on intercompany loans receivable from Thames Water.The company was established to act as a financing company to its immediate parent company, Thames Water Utilities Ltd.

At the end of the period debt levels stood at £15.8 billion. Since then Thames has agreed a £3.0 billion new super senior facility, the first £1.5 billion of which is backstopped by creditors. It has also agreed a two-year extension of all debt maturities dates, deferring £3.2 billion of maturities currently due by January 2027

Commenting on the results, Chief Executive Officer, Chris Weston, said:

"In the last six months we've made solid progress on the transformation and turnaround of Thames Water.

"After recognition from Ofwat with an improved performance ranking, we have continued to improve operational and underlying financial performance, with leakage at an all-time low and investment remaining at high levels in the first half of the year. After record rainfall and groundwater levels in our region, pollutions and spills are unfortunately up; however, we've been increasing pipe relining and cleaning, and the landmark Thames Tideway Tunnel, now in its testing phase, is already reducing overflows into the Tidal River Thames.

"At the same time, we've reached key milestones in establishing a more stable financial platform, agreeing a liquidity extension transaction proposal and progressing our equity raise process. The next critical step is receiving an investable Final Determination which is fundamental to our future."

Key financial performance indicators the water company is highlighting in its interim report and financial statement include:

• 10% growth in underlying revenue to £1.3 billion, reflecting an inflation linked increase in charges for water and wastewater services
• Underlying EBITDA2 of £715 million, up 14% reflecting higher revenue and operating cost discipline
• Underlying profit after tax of £187 million, an increase of £46 million
• Statutory loss after tax of £190 million includes post tax exceptional costs of £427 million and income related to Bazalgette Tunnel Limited
• Capital expenditure of £1.0 billion as we maintain high levels of investment in our ageing assets and to improve network resilience
• Underlying operating cash flow of £605 million, an increase of £26 million.
• Committed liquidity of £1.5 billion as at 30 September 2024; STID proposal approved in November, supporting near-term liquidity by accessing reserved cash
• Launched Liquidity Extension Proposal
• Up to £3.0 billion new super senior facility, the first £1.5 billion of which is backstopped by creditors
• Two-year extension of all debt maturities, deferring £3.2 billion of maturities currently due by January 2027
• More than 75% of Class A creditors signed up to Transaction Support Agreement ahead of a convening hearing on 17 December 2024
• Next phase of equity raise process launched
• Julian Gething appointed as Chief Restructuring Officer

Principal risks and uncertainties

Commenting on principal risks and uncertainties facing the company, the inerim report says:

“Uncertainty concerning the outcome of the PR24 price review and current levels of liquidity has resulted in credit rating downgrades and Trigger Events.

“The success and timing of securing the capital the Company needs to finance our ambitious business plan, turnaround performance and increase financial resilience depends on securing a PR24 price determination that is both financeable and investible.

“This is a matter the Company will continue to engage on with our regulators, and the Government…..

“There is no assurance as to what funding will be allowed, although Ofwat is required to exercise and perform its duties in the manner which it considers is best calculated to ensure Thames Water is able to finance the proper carrying out of its functions.”

Operational performance highlights in the report include:

• 23% reduction in lost-time injuries (HY25: 20: HY24: 26)
• 19% reduction in total complaints (HY25: 31,600: HY24: 38,900)
• 4% reduction in leakage (HY25: 536.5 Ml/d (annual average): HY24: 557.1 Ml/d)
• 3 minutes 42 seconds in supply interruptions (HY24: 2 minutes 52 seconds)
• Record rainfall leads to 40% increase in total pollutions (category 1-3) (HY25: 359: HY24: 257)
• Improvement to 'average' in Ofwat's annual performance ranking