Thames Water’s parent company Kemble has confirmed it will not be able to make debt repayments due next month after losing out on a £500 million rescue package from shareholders, raising the risk it may need to be nationalised.
Kemble Water said it would not pay interest payments on its debts and would not be able to repay a £190 million loan that matures on April 30 unless an extension is granted.
Advisers from turnaround consultant Alvarez & Marsal have been appointed to lead negotiations with lenders and debt holders.
Chancellor Jeremy Hunt said the government will "watch the situation very carefully".
This comes after the company’s immediate parent said earlier on Thursday that it would not be granted emergency funding from shareholders.
While shareholders had approved a turnaround plan, qualifying Thames for the funding, discussions with regulator Ofwat found that the plan would be unfeasible based on new tougher regulatory rules expected next year.
Thames said it would not receive the funding as anticipated by March 31, having been hoping for an initial £500 million, plus a further £250 million later this year.
“I'd like to reassure our customers that, despite this announcement, it is business as usual for Thames Water,” chief executive Chris Weston said.
“Our 8,000 staff remain committed to working with our partners in the supply chain to provide our services for the benefit of our customers, communities and the environment.”
Thames Water supplies around 15 million people in and around London but has hit trouble in recent years as costs of servicing its near-£19 billion debt pile have grown with higher interest.
Sky News reported on Wednesday that investors in the firm, including the Universities Superannuation Scheme (USS) and China's sovereign wealth fund, were in crunch talks over its future, following the decision to water down funding pledges.
Calls have recently come from politicians for the utility to be placed in publicly-handled administration meanwhile, as fears over its survival persist.
As per Thursday’s statement, Thames Water has liquidity of £2.4 billion of cash and available committed facilities.