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Thames Water plans record investment to turnaround performance

Thames water has submitted its business plan for 2025-30 to ofwat as part of price review 2024 (pr24) following consultations with nearly 20,000 customers, the communities in which it operates and its wider stakeholders..

Cathryn Ross and Alastair Cochran, Interim Co-CEOs of Thames Water said: “Our ambitious plan delivers what our customers have told us are their top priorities. We plan £18.7 billion total expenditure – including a record £4.7bn investment in our network and other assets – to maintain safe high quality drinking water, to ensure security of water supplies across London and the Thames Valley now and in the future, and to deliver further environmental improvements. “Our plan prioritises storm overflows, bathing water status and reducing leaks and pollutions. In parallel, we will do more than ever to support customers by introducing an improved social tariff for those who struggle to pay their bills.”

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Thames water plans £18.7b investment to turnaround performance.

About the entity

Thames Water Utilities Finance plc announces that Thames Water has submitted its business plan for 2025-30 to Ofwat as part of Price Review 2024 (PR24) following consultations with nearly 20,000 customers, the communities in which it operates and its wider stakeholders.

Cathryn Ross and Alastair Cochran, Interim Co-CEOs of Thames Water said: ";Our ambitious plan delivers what our customers have told us are their top priorities. We plan £18.7 billion total expenditure - including a record £4.7bn investment in our network and other assets - to maintain safe high quality drinking water, to ensure security of water supplies across London and the Thames Valley now and in the future, and to deliver further environmental improvements. Our plan prioritises storm overflows, bathing water status and reducing leaks and pollutions. In parallel, we will do more than ever to support customers by introducing an improved social tariff for those who struggle to pay their bills."

Our plan will deliver a reliable, secure and affordable service for customers by:

• Preserving a reliable supply of water, with minimal disruption
• Replacing 500km of ageing water mains
• Maintaining safe, high-quality drinking water by replacing 54,000 lead pipes
• Upgrading 150km of sewers to lower the risk of sewer collapses
• Reducing the number of times sewage floods into properties by 17% as well as all other external sewer floods by 14%
• Providing over 530,000 households meaningful support with their water bills
• Resolving more billing and operational issues within 24 hours by improving digital infrastructure, allowing customers to resolve more issues online

Our plan will create more jobs and enhance biodiversity for communities by:

• Hiring more local people by increasing the number of T-levels, summer internships and apprenticeships
• Investing £12 million in improving land to boost biodiversity

Our plan will further materially improve Thames Water’s environmental footprint by:

• Reducing storm overflows by 28%
• Reducing blockages caused by sewer misuse by 15%
• Reducing the total number of pollution incidents by 30%
• Opening the Thames Tideway Tunnel, London’s “super sewer”, the third phase of improvements that will increase the health of the river by reducing combined sewer overflows by c.95
• Investing to improve the bathing water quality at Wolvercote Mill Stream
• Spending over £2.5bn to deliver a 22% reduction in leakage
• Reducing water use per person by 5.5%
• Continuing our industry leading roll out of 1 million smart meters to make it easier for customers to save money and find leaks
• Ensuring water security for this and future generations, including consulting and planning for a reservoir near Abingdon
• Replacing assets that come to the end of their life with carbon neutral alternatives

Our plan is financeable by:

• Delivering an £18.7 billion totex programme to maintain safe high quality drinking water, ensure security of water supplies and deliver further environmental improvements
• Offering sufficient returns for further shareholder funding of £3.25 billion in AMP7 and AMP8, in addition to £0.5 billion received in March 2023
• Proposing a Weighted Average Cost of Capital of 4.25% (real)
• Delivering c.30% real RCV growth over AMP8
• Targeting BBB+/Baa1 investment grade credit ratios
• Reducing average gearing to 71% and strengthening post maintenance interest cover ratio to 2.1x
• Assuming no dividends are paid to our external shareholders during AMP8

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Thames Water has until June 12 to win approval for business plan

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Our future plans - pr24 business plan and long-term delivery strategy, our future plans - business plan 2025 to 2030 and long-term delivery strategy.

Our business plan sets out how we will improve our service to customers between 2025 and 2030.

It will enable us to deliver our purpose - to harness the potential of water to enhance nature and improve lives - which recognises our unique role in society, one where through our day-to-day business we can deliver additional benefits beyond the provision of safe, clean and reliable drinking water. 

At a glance: our business plan

You can download a summary of our plan below. 

• SES Water business plan summary 2023_FINAL (3.9MB)

Our business plan chapters

The plan has been organised into 11 chapters, each of which can be downloaded from the list below. 

• Section 1 SESW Guide to our business plan for 2025 to 2030_FINAL (548KB)
• Section 2 SESW_Executive summary_FINAL (341KB)
• Section 3 SESW_About us and our track record_FINAL (640KB)
• Section 4 SESW Long Term Delivery Strategy_Final (512KB)
• Section 5 SESW Our customers and their priorities_Final (844KB)
• Section 6 SESW The outcomes we will deliver_Final (962KB)
• Section 7 SESW Explaining our costs_Final (812KB)
• Section 8 SESW Financing our plan_Final (459KB)
• Section 9 SESW Affordability_Final (432KB)
• Section 10 SESW Our delivery plan_Final (941KB)
• Section 11 SESW Governance and assurance_Final (444KB)

Latest information on our PR24 business plan 

Since submission of our PR24 business plan to Ofwat in October 2023, we have made some minor changes to parts of our plan. These have been in response to requests from Ofwat or other regulators and to clarify some points in our original plan. The result of these changes to date is that Ofwat are now considering a PR24 business plan for SES Water that includes total expenditure of £413.9 million (up £0.6m from £413.3 million in our October 2023 plan), and average annual customer bills of £262 by 2030 (up £1.86 from £260 in our October 2023 plan). Ofwat's draft determinations will be based on this expenditure and these bills.

The reason for the change to our total expenditure for PR24 relates to some addition IT Cyber Security costs associated with our Smart Metering rollout, and some small changes to timing of some of our expenditure plans.   Both of these had a small knock on effect on the average customer bill by 2030.

You can download a copy of our latest Business Plan tables here:

• SES Water PR24-BP-tables-Revised 28 Mar 2024 (10.6MB)

A summary of the key changes are here:

• Calculation of PR24 business plan costs for publication - March 2024 (31KB)

Our long-term delivery strategy

Our long-term delivery strategy shows the priorities and level of ambition we have during the next 25 years and can be viewed by downloading the file below.

• SESWater_LTDS_FullDocument_FINAL (1.8MB)

Supporting documents

We've published a number of supporting documents that cover our business plan and long-term delivery strategy

• SES001 LTDS - Development Process (1.3MB)
• SES002 LTDS Long-term Ambitions and Priorities (4.4MB)
• SES003 LTDS - Future Scenarios Detailed Report (1.3MB)
• SES005 Explaining Our Costs (3.3MB)
• SES006 Enhancement Case - Water Quality Enhancement (2.7MB)
• SES008 Enhancement Case - Enhanced Leakage and Network Resilience (804KB)
• SES010 Enhancement Case - Environmental Improvement (1.4MB)
• SES012 External Assurance FINAL (7.2MB)
• SES013 Household Customer Strategy (532KB)
• SES014 Customer Research Summary and Methods (1.1MB)
• SES015 Customer Insight Synthesis and Triangulation (1.0MB)
• SES018 Customer Research Reports (29.3MB)
• SES024 ODI Design and Calibration (708KB)
• SES027 Cost Adjustment Claim - Pumping Costs (764KB)
• SES028 Cost Adjustment Claim - Regional Wages (576KB)
• SES029 Cost Adjustment Claim - Softening (1.7MB)
• SES030 Cost Adjustment Claim - Retail Scale (473KB)
• SES032 DWI Submission - Long Term Planning for the Quality of Drinking Water (4.3MB)
• SES034 Ofwat Letter - LTDS Meeting Feedback (716KB)
• SES035 Operational Greenhouse Gas Emissions - Proposed Trajectory (2.3MB)
• SES036 Environment and Biodiversity Evidence (4.5MB)
• SES037 EA Letter - WINEP Programme (520KB)
• SES038 Rebecca Pow MP - Letter and Response (694KB)
• SES040 Customer and Environmental Scrutiny Panel Final Assurance Report (1.2MB)
• SES043 Resilience Framework - Adoption of System Based Thinking (969KB)
• SES044 DMA Asset Health (2.3MB)
• SES046 Cost of Debt Cost of Equity and Inference Analysis Cross Check on Allowed Returns (5.0MB)
• SES048 Financial Stress Testing Scenarios (496KB)
• SES051 Cost Benefit Anaylsis Smart Metering (839KB)
• SES052 Pioneer Modelling (1.2MB)
• SES053 PR24 Governance Framework (1.0MB)
• SES063 Price Control Deliverables and Reporting Metrics (626KB)
• SES064 Impact of Covid on Water Consumption (17.0MB)
• SES065 Dividend and Executive Pay Policy 2025-2030 (1.2MB)
• SES067 Bough Beech and Fetcham Springs Master Plans (3.3MB)
• SES069 RoRE Ranges and RR30 Table Commentary (693KB)
• SES070 Bid Assessment Framework (955KB)
• SES071 Glossary of Terms (457KB)
• SES073 Bespoke Softening Performance Commitment (796KB)
• SESQAA - Signposting-document-for-quality-and-ambition-assessment (42KB)
• PR24-BP-tables-V6-Final for Submission 2 Oct (7.5MB)
• SES_PR24NotionalFinancialModel_v5_Clean (8.7MB)

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Thames Water to Release Updated Business Plan This Week (1)

By Jessica Shankleman

Thames Water Utilities Ltd. ’s board members are set for last-ditch talks to update their business plan this week after shareholders branded the previous one “ uninvestible .”

Directors of the heavily indebted utility are set to meet Thursday, with the plan expected to be released Friday, according to a person familiar with the plans who asked not to be identified discussing private matters. A spokeswoman for Thames Water declined to comment.

Thames supplies a quarter of the water and sewage services to England, including London. It’s rushing to find at least £2.5 billion ($3.1 billion) in equity after parent ...

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Thames Water Has 2 Months to Agree Survival Plan

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Water sector regulator Ofwat will determine in two months whether the financially struggling Thames Water succeeds in securing the required investment to stay afloat.

The clock is ticking for the UK’s largest water utility company to turn around its financial standing before the June 12 deadline, set by Ofwat.

“We will set out our draft determinations in June this year,” said an Ofwat spokesperson.

The troubled water utility firm has defaulted on some of its debts, after its parent company, Kemble Water Holdings Ltd., had pulled £500 million in interest payments, due at the end of April.

Failure to pay interest on the debt has heightened the concerns of Thames Water’s survival.

The CEO of Thames Water, Chris Weston, has reassured customers that despite the failure to secure the £500 million tranche, “it is business as usual” for the company.

“Our 8,000 staff remain committed to working with our partners in the supply chain to provide our services for the benefit of our customers, communities and the environment,” said Mr. Weston.

Meanwhile, Kemble has requested that its lenders take “no creditor action” to “provide a stable platform while all options are explored with all key stakeholders”.

‘Uninvestible’

Their decision against extending a £500 million financial lifeline to Thames Water comes after Ofwat rejected the firm’s five-year business plan.

However, the regulatory arrangements expected by Ofwat from Thames Water made the plan “uninvestible.” Ofwat said its price control regulations prioritised customers and the environment.

“Safeguards are in place to ensure that services to customers are protected regardless of issues faced by shareholders of Thames Water,” an Ofwat spokesperson said.

The regulator wants to ensure that the water sector attracts investment and is fair to billpayers.

“We also need to see companies deliver the performance that customers expect and that they are run in a way that meets customers’ expectations.

“Since 2020 nearly £4.6 billion new equity has been injected into the sector. We will set out our draft determinations in June this year,” the spokesperson added.

The Environment, Food and Rural Affairs Committee (EFRA) said that Ofwat finds itself in a challenging position, having rejected the PR24 business plan.

EFRA Chair Sir Robert Goodwill recognised that the financial failure of the UK’s largest water utility could affect the sector stability and the “public purse.”

All Options

The loans taken by Kemble amount to around £190 million, as reported by the PA news agency.

Should the company fail to repay, the lenders behind the loan could take a stake in Thames Water. ING, Bank of China, Industrial and Commercial Bank of China, and Allied Irish Banks are among the lenders, according to reports by the Financial Times and Sky News.

Thames Water’s regulatory capital value is £19 billion, with £2.4 billion of liquidity available and an annual regulated revenue of £2 billion.

Its financial struggle comes amid the 6.1 percent rise in average household water and sewerage bill in England and Wales, kicking in from April 1.

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