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Thames Water Network ‘In Urgent Need Of Repair’
Utility company Thames Water’s financial troubles are now well documented, but it seems that the situation may be worse than previously reported, with a new investigation finding that some £23 billion worth of assets now need urgent repairs and the firm failing to address serious safety concerns, as well as not upgrading outdated IT systems and upholding a culture of intimidation among employees.
Analysis by the Guardian indicates that neither Thames Water managers nor regulators have thus far realised just how severe some of the issues are that now face reservoirs and pipes.
Speaking to company sources, the investigators heard that although concerns regarding sustainable water management operations had been brought to the attention of those in charge, the problems hadn’t been addressed.
A senior source explained that company operations had been so “hollowed out and cut to the bone” that the public is now being put at risk because of investment failures to deliver even the most basic of needs.
They continued, saying that management hadn’t moved sufficiently quickly enough to tackle issues including weakening infrastructure and cracks in reservoirs, with the company’s bosses and industry regulator Ofwat not taking action to address the problems, which has allowed them to grow.
Mounting debt
Thames Water is now buckling under the pressure of £15 billion of debt, with the company saying it is unable to pay some of its lenders.
This, according to both current and former members of staff, has led to managers slowing down spending or blocking it altogether on critical chemicals, with processes becoming so slow and arduous that in order for clean water supplies to continue, staff members were forced to order water treatment chemicals without approval.
Employees have also claimed that there is a culture of intimidation where costs are concerned, with difficulties involved in gaining approval for necessary budgets. Without this approval, basic and urgent IT upgrades have not been pushed through, leaving infrastructure open to cyber attacks.
Now, some £23 billion is necessary for Thames Water to repair its ailing infrastructure, with fears mounting that this figure could grow in line with regulatory pressure to slash costs and keep bills to a minimum.
This estimated amount is based on asset reviews, including treatment works and pipe networks, which serve 16 million people throughout the catchment area.
Potential renationalisation?
Earlier this month (November 13th), it was reported that Thames Water now has support from its creditors to move forward with the process of securing £3 billion as part of an emergency funding package, which aims to keep the company afloat for at least 12 months.
Currently, 75 per cent of creditors holding the utility firm’s least risky loans have supported a plan to extend cash lifelines, according to the Guardian.
If the company does collapse, it faces being renationalised temporarily, but securing the emergency cash it needs would mean that it will have time to try to raise the billions required in new equity investment to help it restabilise.
Commenting, a Thames Water spokesperson told the news source: “The wellbeing and safety of our colleagues and customers is our highest priority. We supply 2.6 billion litres of water every day, rated among the highest quality of drinking water anywhere in the world.
“We’ve been very open about the ‘asset deficit’ we face, and the challenges we will have meeting future demand if it’s not addressed.
“That’s why we have set out an ambitious plan for 2025-30 which asks for £20.7 billion of expenditure and investment with an additional £3 billion through gated mechanisms, so that we can meet our customers’ expectations and environmental responsibilities.
“Further, we take our requirements to protect customers’ personal data and maintain essential services extremely seriously. We regularly review our systems to ensure their continued reliability.”
An Ofwat representative made further comments, saying that action will be taken against Thames Water if evidence is found that the company has been in breach of its obligations.
“We have been pushing Thames Water to make significant improvements in its operational performance and financial resilience for some time. It is of course essential that all water companies provide a safe and reliable water supply.
“The company has made a request for a substantial increase in expenditure, including to address issues of asset health, as part of the current price review process. We are reviewing that request and the supporting information provided, and will announce our final decisions in December,” the source went on to say.
In a rare piece of good news for customers, however, Thames Water is now one of three companies that have been banned by Ofwat from using billpayer funds to pay bonuses, which should be borne by owners and lenders instead.
Chief executive David Black observed that water companies must now do more to rebuild public trust and that by stopping customers from footing the bill for these “undeserved bonuses”, executive mindsets would be sharpened and firms pushed to improve performance and accountability cultures.
It does, of course, remain to be seen as to whether this will actually happen… but we’ll keep you posted every step of the way.