Thames Water investors have today submitted a new plan to Ofwat to stave off the company’s collapse – the proposal from the London & Valley Water (L&VW) consortium aims to deliver £5.4 billion of committed funding to Thames Water.

The consortium of Class A creditors includes some of the world’s largest financial institutions and investors in the UK infrastructure sector. The recapitalisation is intended to provide the foundation for a return to an investment grade credit rating. It is expected to be the largest ever loss on a UK infrastructure investment.

LV&W said it has submitted to Ofwat a detailed and improved proposal to deliver the turnaround, transformation and recapitalisation of Thames Water, with the aim of reaching alignment as quickly as possible this Autumn given the urgent need to stabilise Thames Water and begin to deliver long-term performance improvement.

According to L7VW, a £3.15 billion equity commitment and a significant 25% write-off of Class A debt (c. £4 billion), a complete write-off of Class B debt (c. £1 billion), effective write-off of Holdco debt (c. £2.5 billion) and the cancellation of existing equity (previously valued at c. £5 billion) under the terms of the Plan would ensure significant deleveraging and reduce gearing “to a conservative 53% on day one”, to what is expected to be the lowest in the sector

New shareholders will commit not to sell the business prior to 31 March 2030

Under the proposal, £12.5 billion of value would be written off, including:

• 25% of existing Class A Debt (c. £4 billion) and all Class B Debt (c. £1 billion) will be written off.
• In exchange for the write-off Class A debt will receive a minimum of 10% of the new equity.
• £2.5 billion of holding company debt will be separated from the structure and effectively written off.
• Existing equity, previously valued at £5 billion, will be cancelled.
• No dividend would be paid for the duration of the company’s Turnaround Oversight Regime (or until the company is returned to the listed markets) to ensure all capital is used to strengthen the business.
• The new shareholders will commit not to sell the business prior to 31 March 2030 to allow for full focus on a stretching turnaround.
• Outstanding fines will be paid and Thames Water will be held to account for reducing pollution and delivering a successful turnaround overseen by a new Board.

London & Valley Water is a large consortium of Class A Creditors of Thames Water comprising UK and international pension funds, insurance companies, asset managers and investment funds, which has been established for the purpose of developing and delivering the Plan.

Members of London & Valley Water also hold substantial debt holdings in other regulated UK water companies. Current members of the consortium hold over 60% of Thames Water’s Class A Debt, with participation in the consortium open to all Class A Creditors in due course.

Plan is result of "unprecedented level of due diligence and constructive engagement" with Thames Water and Ofwat

The detailed statement released by L&VW says:

“The Plan submitted today by London & Valley Water is the result of a competitive equity process and an unprecedented level of due diligence and constructive engagement with Thames Water and Ofwat to develop an ambitious solution for Thames Water which ends the cycle of underinvestment and underperformance that has driven trust in Thames Water to an all-time low.

“The Plan can be implemented without the need for any legislation, does not require any taxpayer or Government funding, and has been designed to be in line with the recommendations and findings of the Independent Water Commission chaired by Sir Jon Cunliffe”

Commenting, Mike McTighe, the proposed future Chair of Thames Water under the terms of the Plan, said:

“There is a huge amount of work to be done to turn around Thames Water and deliver the improved service and environmental outcomes that customers and local communities deserve.

“From day one, we will inject billions in new investment, strengthen Thames Water’s balance sheet, transform the Company for thousands of hard-working frontline staff and begin the delivery of an operational turnaround that puts 16 million customers and the environment first.

“Together with committed and experienced new investors, the collective focus of the new Board under London & Valley Water’s plan will be on fixing the foundations, reducing pollution and rebuilding public trust so that by the end of this decade Thames Water can once again be a reliable, resilient, and responsible company.”

The proposal remains subject to ongoing discussions with Thames Water, Ofwat and other regulators - London & Valley Water said it will continue to work at pace with Thames Water, Government and regulators with the aim of securing a sustainable market solution for the company.

L&VW - " successful delivery of the Plan, if adopted, will avoid special administration"

According to L&VW, the successful delivery of the Plan, if adopted, will avoid special administration, giving “immediate confidence” to employees, customers, suppliers, regulators, the Government and investors in the UK more generally that the risk of Thames Water’s turnaround “will not fall to the UK taxpayer.”

Thames Water had requested £24.5 billion of allowed expenditure in its PR24 business plan submission to fulfil its statutory performance and compliance obligations and was granted £20.5 billion of funding under Ofwat’s Final Determination.

In July Ofwat agreed to a request from Thames Water to further defer the referral of its PR24 Final Determination for the water company to the Competition and Markets Authority for a re-determination until 22nd October 2025.

The London & Valley Water Plan seeks to invest £20.5 billion, but has “reprofiled and refocused this investment” in the interests of customers and the environment and to accommodate capital delivery and supply chain constraints. The Plan seeks to achieve compliance with the company’s current obligations by progressively improving across AMP8, AMP9 and AMP10.