What’s downstream for Thames Water?

These words are on the lips of investors, lawyers, the government and the general public alike. It’s pretty complex; structurally, politically, regulatorily, and in relation to the stakeholders involved.

Things have not been going swimmingly of late. In summary, the group’s shareholders originally said they would provide £750m during AMP7, with more to come in AMP8 (don’t worry, we explain these concepts in our handy table below). This commitment was withdrawn, and so there is now a big funding gap and consequent new money requirement. This is in the context of everything else which is going on: operational headwinds and a challenging regulatory environment. The latter of these — the regulatory environment — is the real pressure point that has led to the shareholders’ withdrawal of support.

The situation is a bit of a many-headed hydra — to steer readers through the situation as clearly as possible, in this piece, we set out:

• A primer in the table below on some of the key concepts you need to know to stand a chance of understanding the situation
• The sorry tale to date
• What we think the likely outcomes are here

But first, some rather dry concepts

There are a few key concepts which are worth outlining before we dive into the deep-end. They’re a little boring, but necessary to understand why Thames is in the position it is and how things might, in due course, play out: