By Paul Sandle and Muvija M
LONDON (Reuters) – The chair of struggling Thames Water said the utility should have been clearer about its complex finances when asked by lawmakers in July, but he stood by its claim that 500 million pounds ($628 million) of new funding was equity and not debt.
Thames Water, Britain’s largest supplier, carries more than 14 billion pounds of debt in the regulated part of its complex company structure, with more in its parent companies.
The high debt, combined with a poor record on the environment and customer service, led the government to prepare a rescue plan earlier this year.
Adrian Montague told a parliamentary committee on Tuesday that an apology “was in order” after reports questioned whether new funding was debt rather than equity.
“We were not clear enough in unpacking the different elements of the shareholders’ contribution,” he said. “And so I’m sorry if we caused any confusion.”
Montague said Thames was under no obligation to pay a dividend on the 500 million pounds provided by its parent Kemble Water.
But if it did not, it could not secure the funds needed to tackle its problems, he added.
The money was provided to Kemble as a convertible note at 8%, and then passed to the regulated entity and converted into shares, hence it was then categorised as equity.
Thames had been paying dividends to Kemble consistently since 2017 to service the parent’s debt, he said
“If Kemble was allowed to go into default, our concern from the Thames board’s perspective is that that would derail the possibility of receiving further equity from our shareholders,” he said.
Underlining the precarious state of its finances, co-CEO Alastair Cochran said the holding company had 1.35 billion pounds of external debt, and 190 million pounds was due to be repaid in April.
It did not currently have that money, he told the lawmakers.
Its shareholders were proposing to discuss with lenders the options to extend that facility until they had clarity on how much the company would be allowed to charge customers, he said.
The chief executive of regulator Ofwat told the same committee that Thames faced an “extremely challenging situation”.
It needed to address “a lot of concerns” about its finances and turn around its operational performance,” David Black said.
($1 = 0.7957 pounds)
(Reporting by Paul Sandle and Muvija M; editing by Sarah Young and David Evans)