It’s ‘junk’: New rating by credit agency piles more pressure on Thames Water

Thames Water faces more problems after being downgraded by one of the leading financial authorities in the world.

Moody’s Ratings says the water firm, which supplies households in West Berkshire, now has a negative outlook, and a debt rate of B3, one of the lowest possible.

It is known as a ‘junk’ rating and means Moody’s thinks there is a possibility Thames Water could default on its debts.

Its parent company has defaulted on some of its loan payments that contribute to a total debt of £16.5bn.

There are fears that the company could now run out of money by May next year.

The Reading-based company has had a torrid year. In March, it revealed that a planned £500m investment from shareholders would not be provided as a three-year turnaround plan stalled.

Thames Water said it continues to work with water regulator Ofwat to keep the company going, and customers will not notice anything different.

A spokesperson said: “Management is engaging with investors and its creditors and remains committed to seeking new equity funding and exploring all options to extend its liquidity runway.

“Increasing our financial resilience and securing an investible determination is a critical priority for the business.

“In the meantime, it’s business as usual for our customers and our teams on the ground who will continue to supply our services and remain focused on the delivery of our turnaround plan.”

The regulator could be forced to step in, under measures announced by the Government in the King’s Speech last week.

These include powers to ban bonuses if environmental standards are not met and increasing accountability for water executives.

It could also see Thames Water placed into temporary public ownership in a similar way to electricity company Bulb.

In November 2021, energy regulator Ofgem put the firm special administration, before transferring it to Octopus Energy a year later.

David Black, Ofwat CEO, said: “We look forward to working with the Government as it aims to increase our powers to drive more responsible decision making in the in the boardrooms of water companies, and support us in going further to protect and promote the interests of customers and the environment.”

Asked about Thames Water in Prime Minister’s Questions on Wednesday, Sir Kier Starmer said: “Customers should not pay the price for mismanagement by water companies.”

He pledged that ministers would meet with the company’s leadership team “to hold them to account for their performance”.