Thames Water restructure approval challenge dismissed at Court of Appeal

Appeals against the approval of a plan to restructure Thames Water through a loan of up to £3 billion has been dismissed, Court of Appeal judges have said.

In February, a High Court judge sanctioned a plan proposed by Thames Water Utilities Holdings Limited (TWUH), the parent company of Thames Water Group, allowing the utility to stay afloat just weeks before it was due to run out of money.

A group of the utility’s secondary creditors, as well as TWUH’s parent company, Thames Water Limited (TWL), appealed against the decision at a hearing last week.

In an order on Monday, Sir Julian Flaux, sitting with Sir Nicholas Patten and Lord Justice Zacaroli, said the appeals were dismissed with reasons to follow in writing “in due course”.

Thames Water’s chief executive Chris Weston said the firm was “pleased” that the Court of Appeal had upheld a “strong High Court decision”.

He continued: “We remain focused on putting Thames Water onto a more stable financial foundation as we seek a long-term solution to our financial resilience. Today’s news demonstrates further progress.

“We continue to work closely with our creditors, enabling us to access liquidity to continue to implement our turnaround plan so we can deliver better results for our customers and the environment while seeking to attract new capital into the business.

“As we have previously stated, the Company Plan will not affect customer bills but will provide continued investment in our network to fix pipes, upgrade our sewage treatment works, and maintain high-quality drinking water.

“We remain of the view that a market-led solution is in the best interest of customers, UK taxpayers and the wider economy.”

TWUH and its Class A creditors had opposed the appeal, with Tom Smith KC, for TWUH, stating in written submissions that the London court should not interfere with the decision “unless compelled to do so”.

And on Monday, a spokesperson for the Class A creditors – who hold more than 75% of the utility’s Class A debt – said: “The decision from the court is clear and we hope this brings to an end the ongoing legal distractions so all parties can focus all efforts on securing billions in fresh equity and new long-term ownership for Thames Water.

“A market-based solution is the best route to achieving financial sustainability for the company in the coming months and will deliver the complex operational turnaround, improved service and environmental outcomes customers rightly expect and deserve.

“Customers will be placed at the centre of the rebuild and will not bear the costs of the restructuring. We will now be working with the company to allow it to move forward and access the money it needs to continue to invest in the business and work with stakeholders to complete an equity process this summer.”

Andrew Thornton KC, for TWL, previously told the Court of Appeal in written submissions that the approved plan was “designed by senior lenders for the benefit of senior lenders”.

He said that the terms of the plan were “mispriced and inappropriate”.

Thames Water serves about 16 million customers – about 25% of the UK’s population – and owns more than 20,000 miles of water mains and more than 68,000 miles of sewers across London, the Thames Valley and the Home Counties.

The High Court previously heard that the restructuring is intended to be an interim measure to keep the utility running before a substantive restructuring due later this year.

Before the decision, Colm Gibson, former head of economic regulation at the utility, told BBC Radio 4’s Today programme that the company could collapse if the money is denied.

He said: “Thames will need to get financing from somewhere.

“If it can’t arrange that finance to carry on it will inevitably end up in special administration.

“If the court says no then there’s a real risk that Thames ends up in special administration in the next few weeks.”