Thames Water agrees to £24.5m payment plan as 'backstop date' set

Thames Water has agreed to pay £24.5 million of its record £122.7 million in fines by September 30 under a payment plan agreed with regulator Ofwat. The industry watchdog, which handed Thames Water the penalties in May, said a fifth of the fines would be due in the initial instalment, with the remaining 80% paid if it agrees a rescue financing deal or is placed into a special administration regime by the Government.

Thames Water said the fines would not be paid out of customer bills. But the remaining 80% is dependent on the financial security and future of the debt-laden water supplier as it teeters on the brink of a possible temporary nationalisation. Ofwat said the remainder will be paid either 30 calendar days after it secures a rescue financing deal and there is enough cash liquidity in the business or, if it is placed into a special administration regime by the Government, 30 calendar days after it exits the insolvency process.

Ofwat said it had set a final "backstop date" of March 31, 2030, for the remaining penalties.

The fines were originally due to be paid by August 20, but Thames Water requested a payment plan due to its financial difficulties.

Lynn Parker, senior director of enforcement at Ofwat, said: "This payment plan continues to hold Thames Water to account for their failures but also recognises the ongoing equity raise and recapitalisation process.

"Our focus remains on ensuring that the company takes the right steps to deliver a turnaround in its operational performance and strengthen its financial resilience to the benefit of customers."

Ofwat announced the fines in May after it said an investigation into Thames Water's sewage treatment works found "a series of failures by the company to build, maintain and operate adequate infrastructure".

The utility giant was ordered to pay £104.5 million for the sewage probe, plus £18.2 million for breaking rules over dividend payments, the industry's first dividend-related fine.

Ofwat pointed to nearly £170 million worth of dividend payments by Thames in October 2023 and March 2024, which the watchdog said were not justified.

But the fines come at a time when Thames is already under extreme financial stress and its chief executive Chris Weston has previously told MPs that if the company faced fines that were too high, it would struggle to get new investment.

Thames Water is feared to be edging closer to a potential temporary nationalisation after the Government appointed insolvency specialists FTI Consulting earlier this month to step up contingency planning in case the supplier collapses.

These plans could see Britain's biggest water firm placed into a special administration regime (SAR), meaning it would be put into an insolvency process.

Thames Water, which has 16 million customers, remains locked in talks over a rescue funding deal with a number of senior creditors.

But it recently raised doubts over whether the creditors' refinancing and restructuring plans could be completed, which could ultimately result in a state rescue deal.

In a statement on Wednesday, Thames Water said: "The company continues to work closely with stakeholders to secure a market-led recapitalisation which delivers for customers and the environment as soon as practicable."