Thames Water handed £3 billion lifeline as court approves restructuring plans to save it from financial collapse

18 February 2025, 09:43 | Updated: 18 February 2025, 11:46

Thames Water has won court approval for a £3 billion emergency debt package as the nation's biggest water company scrambles to avoid collapse.

London’s high court said on Tuesday the deal could go forward after hearing four days of arguments over whether the move should go ahead.

The company, which has around 16 million customers serving 25% of the UK population, has been on the brink of collapse for months. The firm has 8,000 employees.

Thames Water has debts of around £19 billion, which have contributed to underinvestment in the pipes and drains required to stop sewage overflowing into rivers and seas. The company has been heavily criticised over its performance following a series of discharges and leaks.

Thames Water chairman Sir Adrian Montague has said the approval of a £3 billion rescue loan for the company by a High Court judge "marks a significant milestone".

He said it is "a key step in strengthening our long-term financial resilience".

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"Critically, it enables the management team to continue progressing the turnaround," he added.

Chief executive Chris Weston said it is "good news for our customers, puts our business on a firmer financial footing and enables us to continue to invest in our network" and deliver critical services.

Earlier this month, Mr Justice Leech heard several days of arguments over a restructuring plan, known as the "company plan", which, if approved, would provide a loan of up to £3 billion with a 9.75% interest rate.

Thames Water Utilities Holdings Limited (TWUH) is the parent company of Thames Water Group (TWG).

TWUH lawyers claimed the company would enter special administration (SAR) if the plan was not approved.

A smaller group of secondary creditors proposed an alternative plan known as the "B plan".

The court heard this would provide the company with the same funding but on better terms and should be adopted instead.

In a judgment on Tuesday, Mr Justice Leech ruled that the "relevant alternative" to the company plan being approved was SAR.

He said: "After taking into account the public interest in ensuring the uninterrupted provision of vital public services, I nevertheless exercise my discretion to sanction the plan."

A hearing before the same judge, dealing with consequential matters arising from the judgment, is set to begin later on Tuesday.

A hearing to consider whether the "B plan" can be put to creditors for approval could also be held on Wednesday.

Speaking to LBC, Lib Dem MP for Witney, Charlie Maynard, said he is "very likely" to appeal the decision, which he claimed will result in higher bills due to the "eye-watering" interest rates.

He urged had previously urged the High Court in a witness statement on behalf of Thanes Water’s customers to stop the company from taking on the extra £3 billion in debt.

The Lib Dem MP called for the government to "stop hiding under their desk" and intervene to stop the company's "daylight robbery" of customers.

This comes after water industry regulator decided to raise bills by 35% above inflation over the next five years – short of the 53% increase Thames Water applied for.

The £3 billion loan offered by lenders is expected to come in two instalments, with the first payment to get the company through to the autumn, and the second to be used if the company decides to appeal against Ofwat's bill rise.