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The UK government has approached consultants about taking on the role of special administrator in a sign that ministers are preparing for imminent re-nationalisation Thames water.
Consultancies including Teneo, Interpath and EY are among potential candidates to run the so-called special administrative regime, according to people familiar with the process. SAR is a temporary measure designed to maintain services and pay suppliers and staff in the event of a business failure.
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Thames Water is struggling with a £19bn debt pile and has warned it will run out of cash in March if the High Court does not sign off the controversial £3 billion loan at the hearing in early February.
Another government official said there had been “informal engagement” with certain consultancies about the administrator’s specific role, but no formal talks process.
The government’s move to approach administrators is a marked departure from its public stance as recently as October, when Steve Reed, the environment minister, said he had “ruled out nationalisation” because it “won’t solve the problems we face”.
But putting Thames Water into special administration could be imminent if a court blocks a loan agreed with senior creditors or if the company runs out of cash sooner than expected. The £3 billion loan is controversial as it would carry an interest rate of 9.75 per cent, as well as fees and incentives for existing Thames water management.
The deal is being contested by a special group of Thames Water’s junior creditors — who proposed a cheaper deal — and environmental campaigners who argue that the company would be better off in a special administration.
The loan would buy the company time to raise at least £3bn of capital in a parallel process. Investment groups include companies including Castle Water, Covalis and CKI Infrastructure lineup make potential offers for utility service.
Bidders and creditors are waiting to see whether the company will appeal to the Competition and Markets Agency over last month’s decision by regulator Ofwat on the level to which water companies can increase bills for customers over the next five years. Thames Water has not yet decided whether to appeal Ofwat’s decision to the CMA, according to people familiar with the matter.
Ofwat said so Thames will be allowed to raise bills by 35 per cent — much lower than the 59 per cent rise he had sought — lifting average bills from around £436 now to £588 between now and 2030.
The Department for Environment, Food and Rural Affairs, Thames Water and Ofwat did not respond to requests for comment.
EY, Teneo and Interpath declined to comment.
In the latest report to the market on Wednesday, the company’s chief restructuring officer, Julian Gething, said: “Our plan is delivering results for clients and stakeholders by unlocking up to £3bn of new money and securing debt maturities totaling £3.5bn the next two years and freeing up money so we can continue to invest the billions of pounds needed to improve the resilience of our network.
“We believe it is the only viable solution that allows for the capital investment needed to provide stability and security over the long term and will not impact customer accounts.”
The government’s selection of trustees can be complicated by potential conflicts of interest. Teneo was already an adviser to Thames Water and received £5m in fees from August 2023. He also received at least £60m from running a special administration collapsed energy supplier Žaruljastates the State Audit Office.
It also wrote a brief to the High Court supporting the £3bn senior creditor loan, while Interpath wrote a separate brief on behalf of the junior creditors.
Sir Dieter Helm, professor of economic policy at Oxford University, argued that the SAR would allow Thames Water to focus on restructuring and achieving improvements, rather than negotiating a deal with creditors.
