Thames Water - comment

The immediate impact of the Thames Water (TW) response to the OFWAT determination is negative for the bonds but does not change the outlook much. As we said earlier this month, losing IG status meant TW had to appoint a monitor who reports back to OFWAT; it will only exit that regime when it regains IG status, requiring restructuring its balance sheet. The final OFWAT determination will be a political decision. The government will have to balance the billpayer’s anger if it approves a 60% bill rise over five years against possibly having to take TW’s debt onto the national balance if it is nationalised. Saahil is on leave this week but will provide more meat on the bones next week.

Water UK (the industry trade body) has now claimed the OFWAT determination would make it impossible for water to attract investment and reduce the attractiveness of the UK to investors.