ING main lender to Thames Water parent amid uncertainty

As Thames Water descends into a financial abyss, ING and a significant Chinese institution are reportedly among the financiers owed £190 million by Kemble Water Finance by the end of this month.

ING, a prominent Dutch banking institution, has been entrusted with a critical responsibility in determining the trajectory of Thames Water’s parent company, which is in dire straits. There is mounting anticipation that financiers will consent to a loan extension before this month’s due date.

Kemble Water Finance must repay £190 million to ING, among other lenders, by the end of April.

Additionally, banking sources assert that a significant Chinese bank holds a substantial stake in the loan facility.

Before this, the identity of the lenders had yet to be disclosed.

If the loan is not repaid and Kemble Water Finance falls into default, the company risks insolvency; this would exacerbate the crisis that has already engulfed the largest water company in Britain.

However, such a move would not directly affect the water and sanitation services provided to 15 million Thames Water customers in London and southeast England.

Thursday, ING declined to comment.

Kemble cannot repay the £190 million loan due to a regulatory restriction on dividends paid by the operating company of Thames Water.

In December, Sir Adrian Montague, a City magnate appointed chairman of the utility by parachuting last year, acknowledged to parliament members that the organisation could not fulfil its responsibilities under the loan agreement.

However, industry insiders were optimistic that the lending syndicate would extend the April 30 repayment deadline.

Last week, Thames Water (Kemble) Finance announced its intention to “request continued support from their lenders and noteholders to ensure a stable platform during their engagement with all key stakeholders.”

Alvarez & Marsal was retained to provide counsel on these discussions, the report continued.

ING main lender to Thames Water parent amid uncertainty
Thames Water is in a financial abyss due to the inability of the two parties to reach a consensus on a business strategy that will generate adequate returns for the investors, which include the Universities Superannuation Scheme, China’s sovereign wealth fund, and a significant Canadian pension fund.

The shareholders of Thames Water had expressed their intention to invest a total of £3.25 billion in the company over the next few years. The initial £750 million will be injected this year, with £500 million to be paid by the end of March.

The organisation employs approximately 7,000 individuals and provides services to nearly a quarter of Britain’s population.

However, the organisation is inundated with over £18 billion in debt, which necessitates enormous interest payments for repayment.

Moody’s credit rating agency downgraded the entity’s junk status this week.

The utility has been negotiating concessions such as a 40% increase in customer water bills, a relaxation of capital expenditure obligations, and a forbearance regarding impending regulatory penalties.

Fearing for the company’s survival, Whitehall officials had begun developing contingency plans for Thames Water’s potential collapse.

However, the company stated in an October investment plan that its shareholders were “demonstrating their commitment to delivering Thames’ turnaround and life’s essential service for the benefit of our customers, communities, and the environment” by “stepping up to support…much-needed investment.”

It stated then, “Shareholders have already invested £500 million in new funds for 2023.”

Furthermore, they have reached a mutual understanding to contribute an additional £750 million in fresh equity funding—subject to the fulfilment of specific stipulations. These stipulations include the development of a business plan that serves as the foundation for a more targeted improvement in performance for stakeholders, customers, and the environment throughout the following three years. Furthermore, this plan must be substantiated by suitable regulatory frameworks.

A provisional nationalisation if Thames Water ultimately failed would entail placing the company’s operational activities under a special administration regime (SAR), similar to the approach taken in 2021 when the energy supplier Bulb experienced its collapse.

The government would then be concerned that instigating a SAR could cost taxpayers billions of pounds in the long run.

Management instability has plagued the organisation, culminating in the resignation of Sarah Bentley, its chief executive officer of the past three years, last summer.

Former Aggreko chief Chris Weston succeeded her in leadership.

He expressed his optimism that a compromise agreement with Ofwat could be reached this year last week.

Thames Water’s current financial predicament has prompted dissenting opinions from privatisation industry critics, who advocate for renationalising all leading water companies in the United Kingdom.

Several corporations have been compelled to solicit additional capital from their shareholders, and the condition of the water sector is expected to be a significant topic of discussion during the general election campaign.

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