Thames Water is in the middle of insolvency preparations

The UK government has appointed insolvency specialists FTI Consulting to prepare contingency plans for Thames Water, Britain’s largest water company, as the troubled utility continues negotiations to secure crucial funding from creditors

Environment Secretary Steve Reed signed off on the appointment to step up planning should the company, which serves 16 million customers across London and southern England, fail to reach agreement with lenders on a comprehensive rescue package.

The move represents the government’s most concrete preparation yet for potential special administration measures, which would place Thames Water under temporary state supervision similar to insolvency proceedings for critical service providers.

A spokesperson for the Department for Environment, Food and Rural Affairs confirmed the government would “always act in the national interest on these issues,” while emphasising that “the company remains financially stable, but we have stepped up our preparations and stand ready for all eventualities”.

Thames Water, which has accumulated total debt of £22.8 billion since privatisation in 1989, has been seeking emergency funding after private equity firm KKR withdrew its planned £4 billion cash injection in June. The withdrawal left the company scrambling to secure alternative financing arrangements with existing creditors.

The utility has faced mounting regulatory pressure following a record £122.7 million fine from water regulator Ofwat earlier this year for sewage operation breaches and undeserved shareholder payments. Ofwat found that three quarters of Thames Water’s storm overflows were spilling “routinely and not in exceptional circumstances” rather than during exceptional weather events.

Chairman Sir Adrian Montague has previously acknowledged the company remains in “crisis mode” as it seeks to avoid special administration measures. The appointment of FTI Consulting does not signal imminent insolvency proceedings but rather represents prudent contingency planning by government officials.

Industry sources stress that Thames Water continues to operate normally, with no immediate impact on customer services expected regardless of ownership changes. However, the company has indicated that bill increases of almost one-third to £639 annually may be necessary to fund infrastructure improvements.

The company’s debt burden increased significantly under Australian infrastructure bank Macquarie’s ownership, reaching more than £10 billion by 2017. Current shareholders include Ontario Municipal Employees Retirement System, Universities Superannuation Scheme, Abu Dhabi Investment Authority, and China Investment Corporation