Creditors put forward £20.5 billion rescue plan for Thames Water

A group of Thames Water’s creditors has published a £20.5 billion rescue proposal designed to stabilise Britain’s largest water utility and avert a potential collapse.

The plan, revealed on today by a consortium calling itself London & Valley Water, prioritises urgent investment in essential infrastructure while scaling back or delaying projects considered less critical.

Thames Water, which serves 16 million customers across London and surrounding counties, has been under intense pressure due to its £14 billion debt burden, persistent leaks and repeated pollution incidents. Earlier this year the government drew up contingency plans for temporary nationalisation in case the company was unable to secure fresh investment.

Under the new proposal, customer funding would be directed towards improving core services such as leakage control and sewage treatment. Some investors are also prepared to write off parts of their loans in order to improve the company’s balance sheet, though the precise scale of the debt reduction has not been disclosed. The consortium argues that Thames Water’s existing business plan, approved by the regulator Ofwat, is unrealistic given the company’s financial position.

Mike McTighe, chair-designate of London & Valley Water, said the new plan would “improve performance for customers, maintain high standards of drinking water, reduce pollution and address the many challenges Thames Water faces.” He described the proposal as a chance to “transform essential services for 16 million customers, clean up our waterways and rebuild public trust.”

Ofwat welcomed the move but stressed that it will examine the details carefully. “We will review the plan to assess whether it delivers a turnaround in operational performance and strengthens financial resilience, to the benefit of customers and the environment,” a spokesperson said. The regulator expects to receive the full proposal by the end of next week.

The creditor group, which includes international investors such as Elliott Management and Silver Point Capital, has already provided £500 million in emergency equity this year. According to reports, the group is prepared to inject further capital and offer a £1.25 billion package of equity and debt write-offs to secure regulatory and government approval.

If accepted, the plan would require changes to Thames Water’s regulatory settlement for the period 2025 to 2030. Ofwat has indicated it is willing to consider adjustments to prevent the utility from falling into insolvency, though such steps are highly unusual. The urgency reflects both the company’s scale and its importance to public health and environmental standards.

The rescue proposal comes as Thames Water faces additional penalties for environmental breaches. The company recently agreed to pay a £122 million settlement for past pollution offences. It is also struggling to improve its performance on leakage, with losses of around 600 million litres of water per day, equivalent to the daily needs of several million people.

The next few weeks will be crucial. Thames Water has postponed a potential referral of its finances to the Competition and Markets Authority until October, creating a narrow window for agreement. Customers are unlikely to see immediate reductions in bills, but supporters of the plan argue that a controlled restructuring now will prevent more costly interventions later.