A cross-party group of MPs is urging ministers to end talks with US hedge funds that are effectively managing Thames Water. The MPs are calling for the Prime Minister, Andy Burnham, to take public control of the company.
In a report, the MPs stated that ministers should consider emergency legislation to assume control of Thames Water's financial affairs to stabilise the company. Thames Water currently has debts of £20bn and is controlled by a group of around 100 hedge funds and distressed-debt investors.
Alistair Carmichael, chair of the environment, food and rural affairs committee (Efra), expressed concern that the special administration regime (SAR) for failing water companies cannot be triggered for Thames Water based solely on performance. Environment Secretary Angela Eagle has indicated that an SAR, which is temporary public control, cannot be activated under current law due to how the US hedge funds have kept the company operational while seeking to renegotiate its liabilities.
The report advises that Ofwat and the government should withdraw from negotiations with the consortium of distressed-debt specialists, citing a lack of expertise to manage a vital public service. Carmichael stated that the creditors are operating opaquely, seeking relief from environmental penalties and prolonging negotiations while earning millions in debt interest.
The London & Valley Water consortium, which includes Elliott Investment Management, Silver Point Capital, BlackRock, and M&G, is attempting a multibillion-pound restructuring of Thames Water. The consortium is seeking relief from environmental fines, potentially worth up to £1bn, and leniency on environmental measures and performance targets imposed a year ago.
A spokesperson for the London & Valley Water consortium stated that their enhanced proposal would address feedback from Ofwat and ministers, offering the fastest route to resolve Thames Water's issues. The plan includes writing off billions of pounds of debt, providing £10bn of new capital from investors, and ensuring all fines are paid, with no dividends taken until the company is stabilised.