Thames Water disaster: Which different suppliers are struggling?

ears over the monetary well being of Thames Water have introduced different suppliers into the attention of the storm over their debt mountains.

In December, trade regulator Ofwat flagged 5 water suppliers whose monetary resilience it was most apprehensive about.

As nicely as Thames Water, it highlighted Portsmouth Water, Yorkshire Water, Southern Water and SES Water as its “highest priority for engagement”.

Scrutiny of the trade intensified this week after reviews that ministers are engaged on a contingency plan to forestall debt-laden Thames Water from going beneath.

The firm is battling to finance the £14 billion of debt on its books following rate of interest rises.

Debt has been rising throughout the sector, largely due to excessive inflation on index-linked debt – that means corporations owe extra money when financial situations worsen.

Yorkshire Water, which provides greater than 5 million households within the area, racked up a internet debt pile of £5.6 billion in its newest monetary yr.

Its gearing degree, which is a measure of an organization’s monetary danger, stood at 72% – increased than the typical of 68.5%. A better degree signifies the next proportion of debt in contrast with its fairness.

Thames Water’s gearing degree was greater than 80% final yr.

Yorkshire Water admitted that its efficiency requirements have fallen brief in areas like sewer flooding and unplanned outages, and stated it must do extra to regulate its price base.

Ofwat stated in its December report that it had been working with the provider to enhance its monetary resilience, together with by lowering its gearing degree and enterprise a monetary construction assessment.

Southern Water, which supplies wastewater providers for areas in Kent, Sussex, Hampshire and the Isle of Wight, and provides water to 2.6 million properties, had the same internet debt pile of £5.2 billion final yr.

In April, the group revealed a turnaround plan to “rapidly improve performance” earlier than 2025, whereas it additionally acquired a £530 million money injection to help its monetary place.

Smaller provider Portsmouth Water had a gearing degree of 73%, whereas SES Water’s stood at 72% final yr.

Furthermore, among the companies have low credit score scores, that means they’re thought-about extra prone to not with the ability to repay debt.

It’s no marvel waves of fear at the moment are surrounding extra companies who’ve been caught uptide, because the period of low cost cash has been dammed and their debt funds have hurtled upwards

Susannah Streeter, head of cash and markets for Hargreaves Lansdown, stated: “Big questions are now being raised about the potential precariousness of other water firms.

“Ofwat had been monitoring Southern Water and Yorkshire Water, as well as Thames Water, given its concerns over their financial resilience.

“In its 2022 annual report, it also flagged worries about Northumbrian Water and Portsmouth Water for having fallen far short of expectations when it came to the level of dividends paid given their relative financial resilience.

“It’s no wonder waves of worry are now surrounding more firms who have been caught uptide, as the era of cheap money has been dammed and their debt payments have hurtled upwards.”

Yorkshire Water stated: “We understand the importance of continuing to have robust financial structures in place and we’ve listened to Ofwat’s concerns and taken action.

“The repayment of intercompany loans is a prudent measure to continue our resilience into the future.

“We agreed with Ofwat that the loans, totalling circa £940 million, will be repaid before the end of March 2027 and with capital injections from our shareholders we’ve been able to repay a substantial amount already.

“This is funding significant improvements in Yorkshire’s rivers and coastlines which we know is something our customers really care about.

“Alongside this, we’ve been significantly improving our financial position over the last six months with a stronger and more resilient balance sheet.”

Content Source: www.commonplace.co.uk

Thames Water disaster: Which different suppliers are struggling?

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