An independent monitor is to be appointed at Thames Water to oversee the company’s turnaround plan as it was put into special measures in an attempt to stave off collapse.
The monitor – which will report to Ofwat, the industry regulator – will have access to the company’s financial information and will hold it to account over its efforts to steady its finances and secure fresh investment.
It comes after Thames’s credit rating was downgraded twice by ratings agencies in July, which constituted a breach of its licence to operate, the regulator said.
Agreeing to a monitor is one of four commitments Ofwat has imposed on Thames. The company must also develop a “suitable” business plan, as well as taking the steps required to deliver an equity raise and appointing new non-executive directors to its board.
Ofwat chief executive David Black said: “We are clear that Thames Water needs to remedy its licence breach, turn around its operational performance, and secure backing from investors to restore its loss of investment grade credit rating.
“These enforceable commitments will include our putting an independent monitor into the business, to report back to us on what is happening to drive meaningful change in performance, and to ensure appropriate expertise is added to their board.
“We will continue to monitor progress very closely and will not hesitate to take any further action if necessary.”
Under the plan, which is currently up for consultation, the commitments will remain in place until the company regains two investment grade credit ratings.
Moody’s downgraded its rating for Thames to junk status on July 24, indicating that the credit agency thinks the utility company is likely to default on its debt.
S&P downgraded Thames Water’s Class A debt rating to BB and its Class B debt rating to B in a separate announcement on July 31.