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Thames Water, the UK utility struggling under almost £20bn of debt, has said that chief financial officer Alastair Cochran will unexpectedly step down at the end of this month as the company fends off a cash crunch.
The utility, which serves 16mn people across London and the Thames Valley, is facing a shortage of cash that could leave it with as little as £39mn by the end of March.
Thames Water recently agreed a £3bn emergency loan from senior creditors but cannot begin to access the money before early April. It is working to persuade lenders to allow it to access the cash early but the loan could also still be subject to a challenge in the Supreme Court from a rival creditor group or environmentalists led by the Liberal Democrat MP Charlie Maynard.
Thames Water’s chair Sir Adrian Montague said Cochran, who had been with the company since 2021, had led the work to put the utility’s finances on a “more stable footing” and that he had laid the foundations for the “wholesale recapitalisation of the business”.
But the finance director’s departure underlines the scale of the crisis at the UK’s largest water company, which is facing a public backlash over substantial bill increases and protests over sewage pollution. It is seeking to avoid becoming the first water company to be renationalised since England’s utilities were privatised in 1989.
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The £3bn loan is designed to buy time for the company to raise billions of pounds of equity. Its existing shareholders, which include the Chinese and Abu Dhabi sovereign wealth funds as well as pension funds USS and Omers, walked away from the business last year and declared it uninvestable.
Potential bidders so far include KKR, CKI Infrastructure, Castle Water and Covalis, with a shortlist due next week. But although Thames Water is hoping that a deal will be agreed in June, the company has admitted there is “no certainty” of an agreement.
The creditors, which represent £12bn of the company’s debt and include the hedge funds Elliott and Silverpoint as well as M&G and BlackRock, have also said that they will do an equity deal if the other bids fail to materialise.
Although Cochran’s departure was unexpected, the existing management, including chief executive Chris Weston and the board, were widely tipped to be replaced as part of a recapitalisation of the water utility later this year, said a person close to the creditors. The bidders were expected to brief headhunters within the next few weeks, the person added.
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Another person close to the business said everyone would want to “draw a line under the past”. “If Cochrane hadn’t gone now, he would have gone later,” the person said.
The search for cash comes as Thames Water’s customers face a steep 31 per cent increase in bills from April, under which average household bills will rise by an average of £151, to £639. The cash is needed to keep the business running and deliver much-needed infrastructure improvements. The company has admitted its ageing assets pose a “risk to public safety”.
Maynard on Friday called for environment secretary Steve Reed to put the company into special administration. Cochrane’s departure made Thames Water’s position “ever more untenable”, the Lib Dem MP said.
Under special administration, the UK government would step in and backstop Thames Water’s operations, ensuring that services would keep running and that suppliers and employees would be paid on time. The debt interest would be frozen, freeing up additional cash for spending on infrastructure.
