Jasper Jolly and Anna Isaac

Mon, Jun 9, 2025, 4:01 PM4 min read

Lenders to Thames Water have said they will provide £5bn in funding to the struggling utility, in an emergency turnaround plan that has quickly raised concerns from the water regulator, Ofwat, over potentially inadequate losses for debt holders.

The group of existing senior creditors to Thames Water, a band of more than 100 financial institutions, said their plan would inject £3bn of equity and another £2.25bn of debt.

However, they said their plan would reduce total debt levels at Thames, which is struggling under about £20bn of debt. In total, lenders would write off about £6.7bn of their loans to Thames and its parent company in an effort to reduce the huge load and in preparation for an eventual stock market listing.

Creditors admitted their plan hinges on a considerable leniency from Ofwat, the government’s water regulator for England and Wales, over future fines for environmental failings.

The creditors have requested that Ofwat set Thames Water lower environmental standards – and even for it to let the water company off without fines for past breaches of its licences and permits.

The creditors will argue to Ofwat that the much-criticised leniency is necessary to avoid a “doom loop” of fines preventing recovery. The Guardian previously revealed that creditors are hoping for immunity for directors from prosecution for environmental crimes.

Thames Water has been on the verge of financial collapse for several years, after decades of underinvestment and dividend extraction left it with leaking pipes and treatment works falling apart, even as its debt mountain grew.

The company has desperately been seeking a way out of the turmoil without the government being forced to take control under a special administration regime (SAR), essentially temporary nationalisation.

The government is also opposed to stepping in unless there is a direct threat to water and sewerage services for 16 million customers in London and south-east England.

The creditors were forced to step forward with a rescue plan after the preferred bidder, the US private equity firm KKR, pulled out last week in a shock announcement. KKR is thought to have balked at the complexity of taking on Thames Water amid intense political scrutiny.

KKR’s withdrawal will mean long-term control of Thames Water will sit with the group of about 100 creditors, ranging from big institutional investors such as Aberdeen, BlackRock, Invesco and M&G, to US hedge funds – such as Elliott Investment Management and Silver Point Capital.

It is widely acknowledged that creditors will have to write off a significant portion of existing debts to allow Thames to recover.