Ofwat, the water regulator in the UK, faced intense questioning in the House of Lords regarding its handling of debt-laden Thames Water and concerns over the company’s future.
The CEO of Ofwat, David Black, admitted that the regulator should have intervened earlier to prevent water companies from increasing borrowing in the early 2000s.
Lord Cromwell queried why concerns were not raised earlier after Macquarie acquired Thames Water in 2006, loading it with £14 billion of debt.
Black admitted that the financial resilience issues have become more acute in recent years but maintained that Ofwat should have intervened back in 2006 when the company was highly geared.
The committee learned that most water companies are considering significant bill increases for customers.
Black clarified that Thames Water has approximately £4 billion of liquidity to rely on, which somewhat alleviates concerns about the company’s financial stability.
He added that Thames Water is currently revising and redeveloping its turnaround plan and will submit a business plan to Ofwat in October.
