WIREDGOV

Ofwat has today published a series of commitments that Thames Water will agree to comply with after it lost two investment grade credit ratings; something all water companies must maintain as part of their licence to operate.

The commitments, subject to consultation, are built around four key elements:

• The appointment of an independent Monitor to report on the company’s progress, including against its transformation plan. The independent Monitor will report back to Ofwat frequently and be entitled to access to company information;
• Developing and delivering a suitable operational business plan to achieve turnaround;
• Taking the steps required to deliver an equity raise;
• New non-executive director board appointments.

The company’s licence breach follows the credit rating downgrades by Moody’s on 24 July and S&P on 31 July. These commitments will remain in place until the company regains two investment grade credit ratings.

David Black, Chief Executive of Ofwat, said:

“We are clear that Thames Water needs to remedy its licence breach, turnaround 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.”

A consultation on the commitments, ahead of a final decision, is now live and the deadline for responses is 5pm on Friday 16 August.

Notes to editors 

These enforceable commitments, known as ‘undertakings’ are offered by Thames Water to Ofwat pursuant to Section 19 of the Water Industry Act 1991. Paragraph 26 of Condition P of the Licence provides that: “The Appointee (Thames Water) must ensure that it or any Associated Company which issues corporate debt on its behalf maintains, at all times, two Issuer Credit Ratings which are Investment Grade Ratings from two different Credit Rating Agencies, other than where Ofwat provides its written agreement for the Appointee to maintain only one Issuer Credit Rating which is an Investment Grade Rating.”