Thames Water rescue deal at risk over missing assets

Fresh uncertainty has emerged in the search for a white knight investor for Thames Water, as the company faces difficulties in detailing its vast and complex network of pipes, sewage treatment plants, and reservoirs.

Thames Water has intensified efforts to secure new investors willing to inject billions in emergency funding following Court of Appeal approval for a £3 billion debt bailout from existing creditors.

However, potential investors are concerned that progress could be delayed due to the company’s inability to maintain accurate records of the extensive assets it has amassed over the years.

Thames Water is racing against the clock to strike a deal within weeks, or risk being stuck in a precarious financial position where lenders provide just enough cash each month to cover its operating costs.

“The board needs to move quickly into due diligence, but that becomes far more difficult when you can’t clearly identify the company’s assets,” said a source close to the discussions. Thames Water is aiming to choose a preferred bidder from a shortlist of six by the end of June, with the goal of completing a takeover by September.

According to a September 2024 investor report, the utility claims to manage 20,000 miles of water pipes, operate over 68,000 miles of sewers, and own 5,235 pumping stations—collectively valued at just over £20 billion.

However, concerns over asset transparency remain. It emerged last year that up to a third of Thames Water’s infrastructure may be unmapped. In response to a Freedom of Information request from the Financial Times, both Thames Water and Southern Water admitted they only map pipelines during maintenance or repair work, leaving significant portions of their networks undocumented.

Southern Water, which has been forced to borrow hundreds of millions from hedge funds due to a sharp decline in its credit rating, has admitted it has lost track of up to 40% of its sewage network. The company cited the ‘prohibitive’ cost of maintaining accurate records as the reason.

For Thames Water, the lack of clear data on the scale and condition of its infrastructure has remained a major obstacle in convincing creditors to inject fresh capital and stave off the risk of nationalisation.

With no precise understanding of what assets it holds, both the company and its lenders have struggled to accurately assess how much funding is required for essential repairs and upgrades.