Thames Water creditors fail to get veto over fine payments | Money News

Thames Water’s largest creditor group has failed to secure a veto over whether a £3bn emergency funding injection is used to settle regulatory fines imposed for a string of environmental and performance failings.

Sky News can reveal that a clause stipulating that the company’s A lenders – which account for well over £10bn of the debt owed by Britain’s biggest water company – would be able to block the payment of fines from their emergency liquidity injection was removed during an earlier stage of negotiations with the industry regulator.

A newspaper report earlier this week suggested that the creditors had told Ofwat that the capital could not be used to settle hundreds of millions of pounds in penalties due over the next 12 months.

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Sources close to the group confirmed on Thursday, however, that no formal veto existed.

“They wanted [a veto], but it was removed from the formal negotiations weeks ago,” said one.

In a term sheet issued several weeks ago and published on Thames Water’s website, the parties said that Thames Water would “use reasonable endeavours to engage with Ofwat, the Environmental Agency and the Drinking Water Inspectorate, to mitigate the financial impact of any potential fines that may be payable or compliance costs that may be incurred in connection with any investigation”.

Thames Water is drowning under well over £15bn of debt, and faces the prospect of being temporarily nationalised if it fails to secure billions of pounds in new equity funding in the coming months.

Sky News revealed last month that KKR, the private equity behemoth and a shareholder in Northumbrian Water, was among the parties engaged in talks with Thames Water’s advisers.

This week, Bloomberg reported that a consortium including Castle Water, which is controlled by the Conservative Party treasurer Graham Edwards, was preparing to inject up to £4bn in exchange for a controlling stake in the company.

The entire industry faces a crunch moment on December 19 when Ofwat issues its final determinations on water companies’ five-year investment plans.

Spokespeople for Thames Water and its creditors declined to comment.