Thames Water creditors seeking control of the struggling utility have softened their position, signalling a willingness to accept greater public oversight to secure a deal.
Mike McTighe, a turnaround specialist working with the creditor group, has called on incoming Prime Minister Andy Burnham to sit down for direct talks about the company’s future.
Burnham is widely expected to push Thames Water into a special administration regime, pulling it into public control as part of his broader push for greater public ownership of utilities.
A report from administration firm Teneo found that the special administration regime proposal reportedly favoured by Burnham could leave taxpayers facing a bill of up to £4bn.
A Burnham ally told The Sunday Times: “If it is going to cost the taxpayer £2bn to keep the company afloat then the taxpayer needs to receive something in return; that means control, so that we can fix the company and secure the water supply for thousands of families and businesses.”
The creditors, however, are understood to be pushing for a proposal that would not burden the taxpayer with the billion-pound cost of overhauling Thames Water’s ageing infrastructure.
Their consortium, which includes Apollo Global Management, Elliott Management, Farallon Capital Management and Silver Point Capital, holds roughly £17bn of Thames Water’s £21bn debt pile.
The group is proposing to inject £3.35bn of fresh equity alongside £6.25bn of new borrowing, while writing off £9.6bn of existing debt in what would be a major financial restructuring.
McTighe said: “We fully recognise that Thames Water is a crucial part of our critical national infrastructure. We will work with Andy Burnham, his Government and local authority leaders to rebuild confidence in Thames Water and the wider sector.”
He added: “We are keen to meet new ministers as soon as possible to discuss how we can work together in the best interests of customers, including by enhancing public control of the company’s operations.”
Despite the creditors’ overtures, City AM understands that no engagement has yet taken place between the creditor group and Burnham’s team.
McTighe said the group remained committed to a private-sector solution, stating: “We remain ready and willing to recapitalise Thames Water, return it to investment grade, and begin the long process of turning it around.”
McTighe is working alongside the creditors on a plan to restructure the company’s debt and establish a new board, of which he would serve as chair.
Lucy Powell, the deputy leader of the Labour Party, indicated on Sunday that Burnham intended to challenge the existing model for how utilities are run in Britain.
“Andy’s been really clear that that model is something that he wants to look at and take on, so that these things work in the interests of ordinary consumers and bill payers,” she told Times Radio.
Powell also noted that existing legal powers were already available to the government, saying: “The government already has powers to step in if necessary and has powers for special measures, as it’s called.”