UK lawmakers urge rejection of creditor bid for Thames Water

A cross-party committee of British lawmakers has urged the government to turn down a rescue bid from Thames Water's creditors and instead place the struggling utility into temporary public ownership, with the company only months away from exhausting its cash reserves.

The Environment, Food and Rural Affairs Committee, which scrutinises government policy but whose recommendations are not binding, said the consortium of around 100 hedge funds and other investors behind the creditor offer does not have the public, the company or the environment at its heart.

"We do not believe this opaque consortium of 100 hedge funds and others has the interests of the public, the company or the environment at heart," committee chair Alistair Carmichael said.

The committee wants legislation amended so that Thames Water can be brought under the Special Administration Regime, a mechanism that amounts to temporary nationalisation. It argued that any costs borne by the government could be recovered if the business is stabilised and later sold.

It also called for regulatory changes to break the "doom-loop" that has deepened the company's troubles, in which fines for poor performance leave it with less money to invest.

The creditor group had said in July that it was working on an improved rescue package, which could include a 'golden share' for the government, in an effort to win official backing for its bid.

Prime Minister Andy Burnham has described nationalisation as the best solution for Thames Water, though such a move could leave the cash-strapped government facing a multi-billion-pound bill.

Thames Water is the UK's largest water company, serving 16 million customers, and carries roughly £20 billion in debt. It has faced heavy fines over its environmental record and has been blamed for polluting rivers with sewage.

In response to the committee's recommendations, Thames Water said it needs to be recapitalised and placed on a firm financial footing so that it can keep investing. A spokesperson for the London & Valley Water creditor consortium said its enhanced proposal was the quickest way to resolve the company's complex problems.