Thames Water warns on cash as liquidity falls further

(Sharecast News) - The UK's largest water company Thames Water could see its cash run dry by the end of next May, it was revealed on Tuesday. Despite holding £2.4bn in liquidity at the end of March, that figure had dropped to £1.8bn by the end of June, Sky News reported.

The privately-held company had struggled to secure new investment after shareholders withdrew a promised £500m amid disputes with industry regulator Ofwat.

Thames Water's board acknowledged that while equity might be received by March next year, it could not rely on that for its financial planning.

As a result, Thames Water was now required to prepare a "remedial plan" for lenders due to non-compliance with certain financial tests, complicating its operations related to incurring debt and making payments.

The company, which is saddled with over £15bn in debt, paid two dividends totalling £158.3m in March, potentially leading to further penalties from Ofwat.

Despite its underlying financial woes, Thames Water reported a profit of £75m for the financial year, with incidents of serious pollution down 18% year-on-year.

However, its future remained uncertain as the company was seeking approval from Ofwat for a substantial increase in customer bills by up to 44% over the next five years, in exchange for nearly £22bn in infrastructure investments.

Ofwat previously rejected a 40% hike in bills, leading to the withdrawal of promised investment and forcing Thames Water to look for new investors.

The regulator was set to make a final decision on the company's business plans by December.

Chief executive officer Chris Weston indicated that while the prospect of special administration was not imminent, the company's financial stability was heavily dependent on Ofwat's upcoming rulings.

The special administration process would place the company under temporary public ownership to ensure continuity of services while long-term solutions were devised.

Thames Water has faced massive criticism in recent years for prioritising shareholder returns over infrastructure investment, and for lagging in meeting performance targets for leaks and sewage discharges.

The company was also bracing for a potential £40m penalty from Ofwat over a controversial £37.5m payout to its owners last autumn, which violated regulatory rules against rewarding shareholders during periods of poor performance.

Reporting by Josh White for Sharecast.com.