The court of appeal has upheld Thames Water’s £3bn emergency bailout loan, in a decision published on Monday.
Appeal court judges dismissed an appeal from environmental campaigners and a small group of Thames creditors after a three-day hearing last week.
Both groups argued that the “eye-watering” costs of the £3bn emergency loan, at interest rates of 9.75%, were not in the public interest. They said putting the ailing water company, which has debts of £19bn, into temporary nationalisation under a special administration regime would be more cost effective.
The decision in Thames’s favour means the company can continue operating long enough to attempt a restructuring of debts and the gathering of new investment.
Thames Water, which has 16 million customers and 8,000 employees, has been on the verge of collapse for months.
The deal will give the company £1.5bn in cash from creditors, released monthly, plus up to £1.5bn more to see it through an appeal to try to increase bills by more than the 35% allowed by the industry regulator for England and Wales, Ofwat.
Thames Water argued in court that it would run out of money on 24 March if the emergency debt deal did not go through. It will still have to raise billions of pounds of additional equity to repair its finances over the longer term. The company last week said it was considering several bids from unnamed parties.
Chris Weston, the Thames Water CEO, said: “We are pleased that the court of appeal has today decisively refused the appeals and upheld the strong high court decision to sanction the company plan. We remain focused on putting Thames Water on to a more stable financial foundation as we seek a long-term solution to our financial resilience. Today’s news demonstrates further progress.”
Weston added: “The company plan will not affect customer bills but will provide continued investment in our network to fix pipes, upgrade our sewage treatment works, and maintain high-quality drinking water. We remain of the view that a market-led solution is in the best interest of customers, UK taxpayers and the wider economy.”
The high court gave Thames Water permission to go ahead with the bailout in February, but Mr Justice Leech said that the costs of the financing were “eye-watering”.
Campaigners led by Charlie Maynard, Liberal Democrat MP for Witney, on behalf of a group of environmental charities, appealed last week along with a group of creditors. Maynard said today: “Thames Water remains a cash cow for its lenders, while its 16 million customers are left to foot the bill for the company’s ludicrously expensive interest charges, advisory fees and mounting debts.
“It is in the Government’s power to end this now for the benefit of the British public and seek to put the company into special administration. We must not stand back and allow Thames Water’s lenders to keep lining their pockets at the expense of customers and the environment while our regulators sit on their hands and the company pumps gallons of sewage into our rivers, neglects basic repairs and hikes up customers’ bills.”
The court of appeal will publish its reasons at a later date.
In a statement, the creditors who brought one of the appeals, known as the class B creditors, said: “While we are disappointed with the court of appeal’s decision to dismiss our appeal, we are pleased the court has struck out the proposed releases of the company’s directors and advisers from legal liability, which the class B creditors have consistently maintained are inappropriate in an interim restructuring plan such as this one.
“Until the court of appeal releases its judgment, our position remains unchanged, and we will continue to explore all available avenues, including seeking leave to appeal to the supreme court, to ensure that customers and the broader public are not forced to bear the costs of a deeply flawed restructuring process.”
