(Reuters) -Britain’s water regulator stepped in on Wednesday with a plan to force struggling Thames Water to improve its performance by appointing an independent monitor, after the company breached its licence.
Heavily indebted Thames Water, the country’s biggest supplier, is at the centre of a crisis over sewage flowing into rivers and seas, forcing the government to promise to clean-up the industry.
But the company’s strained finances are hampering its efforts to improve its environmental performance. It has said it will run out of money in the middle of next year if it does not raise fresh funds.
In July, Thames Water breached the terms of its licence after losing two investment grade credit ratings, and regulator Ofwat said the company would now agree to comply with a series of commitments.
“We are clear that Thames Water needs to remedy its licence breach, turnaround its operational performance and secure backing from investors to restore its loss of investment grade credit rating,” Ofwat Chief Executive David Black said in a statement.
Thames Water, which provides water to a quarter of British households and has 18 billion pounds ($23 billion) of debt, has said it needs Ofwat to allow it to significantly hike bills during the next regulatory period, known as the PR24 determination, to help attract investors.
“We remain focused on working with Ofwat to secure an investible PR24 determination, which is key to attracting equity into the business,” Thames Water said in its statement.
Without new investment, the government could need to temporarily renationalise Thames.
The commitments Thames Water is signing up to include developing a suitable turnaround plan and the independent monitor reporting back to the regulator on the company’s progress against the plan, plus the appointment of new non-executive directors.
Ofwat said it would run a consultation on the commitments until Aug. 16.
($1 = 0.7875 pounds)
(Reporting by Sarah YoungEditing by William Schomberg and Michael Perry)
