Debt-riddled water giant Thames on hook to China amid warnings it will default

Chinese banks are set to determine the fate of Thames Water amid warnings it will default on its debts.

Foreign lenders including the state-owned Bank of China and the Industrial and Commercial Bank of China are among the consortium to have loaned money to the utility group’s parent company Kemble Water.

Thames Water, Britain’s biggest water firm, is due to repay £190million to the banks by the end of April.

But the firm is at risk of missing the deadline after shareholders refused to hand over extra funds.

If the repayment date is missed, it will be up to the lenders – which also include ING and Allied Irish Bank – to extend the deadline or put Thames Water, which has 16m customers, into administration. 

Debt burden: Thames Water, Britain’s biggest water firm, is due to repay £190m to the banks by the end of April

The banks have so far refused to extend the loan without fresh funding from Thames Water’s owners.

Meanwhile, ratings agencies have cut the debt-laden company’s credit rating amid a mounting cash crisis.

The water supplier has an £18billion debt pile and is facing soaring interest payments. 

Fitch Ratings yesterday cut the debt of Thames Water holding company Kemble Water Finance deeper into junk territory, warning that ‘some form of default was probable’.

Meanwhile, S&P lowered its rating of the utility’s bonds and Moodys downgraded its credit rating closer to junk status.

It comes after Thames Water announced last week that its shareholders will not hand over a promised £750million. The company – which wants to hike customer bills by 40 per cent – could be nationalised if it cannot raise new funding.

Shareholders were due to hand over the first £500million instalment by the end of March.

However, the investment was dependent on industry regulator Ofwat approving the business’s turnaround plan – including a huge increase in customer bills.

Ofwat blocked the hike and refused to ease capital spending requirements and waive fines for failing to meet targets.

The utility, which provides water to households in London and the South East, risks falling into special administration if it cannot find extra funds before the end of next year.

Former Tory leader Iain Duncan Smith said Chinese influence over Thames Water was concerning. ‘Water is the most base asset of the lot,’ he said.

Ofwat said last week that the company ‘must now pursue all options to seek further equity for the business to turn around the performance of the company for customers’. 

The regulator and the company stressed that water supply to Thames Water customers will not be affected.

Thames Water has been in the firing line over its high debt levels, poor customer service and sewerage leaks into Britain’s waterways.

The group was plunged into crisis when Sarah Bentley quit as chief executive in June last year as fears mounted over its financial stability. 

Former British Gas executive Chris Weston was hired in December, vowing to deliver a turnaround plan.

This post first appeared on Dailymail.co.uk