Thames Water creditors offer golden share and public oversight in bid to head off nationalisation

Photo credit: Luis Tosta

The consortium of creditors that has effectively controlled Thames Water since its shareholders wrote down their investment in 2024 has put forward a revised rescue proposal aimed at averting nationalisation by the new Andy Burnham administration. Under the plan, ministers would be offered a golden share in the company, described by the consortium as similar to the government’s holding in Royal Mail, conferring veto rights over asset sales, changes in ownership and increases in debt. The consortium, known as London & Valley Water, has also indicated it would establish new public-interest supervisory structures, giving local authorities and the Mayor of London a direct line to the Thames Water board.

Political context

Burnham became prime minister on Monday and has repeatedly signalled support for public ownership of Thames Water, pledging in his first Downing Street speech to place “life’s essentials” under stronger public control. Thames Water carries around £21 billion of debt and has said it will run out of money by November, giving the incoming government little time to decide whether to accept a privately funded restructuring or place the company into a Special Administration Regime, the water industry equivalent of temporary state control used for Bulb in 2021. Angela Eagle has been appointed Environment Secretary and is expected to receive the consortium’s revised proposal in the coming weeks.

Concessions on the table

In its own statement, the consortium says the revised plan would see existing shareholders lose their investment entirely and creditors write off £9.6 billion of debt, which it describes as an unprecedented loss on a UK infrastructure asset. New investors would provide £10 billion of fresh capital, with all profits reinvested in the network until Thames Water is turned around and returned to the public markets. The consortium says its plan would put the company on a sustainable footing without any increase in customer bills beyond those already approved by Ofwat. Additional commitments announced this week include a ten-year suspension of dividend payments, enhanced governance arrangements, expanded customer social tariffs, and a lock-up on a significant proportion of the new equity. The consortium’s members include the hedge funds Elliott, Silver Point and Apollo.

Legal threat in reserve

The BBC has reported frustration from rival potential bidders that London & Valley Water’s control of the company has shut out competing proposals. Reuters separately reported on 20 July that the same creditors have instructed lawyers to prepare a legal challenge should the government proceed with nationalisation, and have indicated they would seek to recover Thames Water’s outstanding debts through the courts. Sources close to the group have described the preparations as precautionary and said court action would be pursued only as a last resort. The consortium has separately appealed to the Competition and Markets Authority against Ofwat’s latest price determination, seeking a higher allowed rate of return and relaxed targets on sewage spills, leakage and customer service.

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