Committee publication · Correspondence · 9 June 2025
Correspondence from Chris Weston, CEO, Thames Water, in response to evidence before the Committee and our letter of 23 May, dated 30 May 2025
From: Environment, Food and Rural Affairs Committee
Inquiry: Reforming the water sector
Summary
Thames Water's CEO responds to the Environment, Food and Rural Affairs Committee's oral evidence session of 13 May 2025 and follow-up letter of 23 May. The letter addresses 15 substantive topics, including clarifications on a £895.5 million derivatives loss in 2022, deferral of 98 environmental schemes, dividend payments, financing conditions, estimated penalties up to £480 million, restructuring plan costs, board oversight, water poverty initiatives, and asset replacement rates.
Key findings
- Thames Water reported £895.5 million in net losses on financial instruments in 2022, primarily £822.1 million on interest rate and foreign exchange swaps—standard hedging practice for utilities.
- Of 826 planned WINEP7 schemes, 742 were completed by end of AMP7; 98 were deferred due to delivery constraints, funding issues, and safety considerations, with commitment to complete remaining schemes in AMP8.
- Estimated exposure to Environment Agency fines is £480 million worst-case, plus £900 million in ODI penalties over AMP8 and Ofwat's £104.5 million fine for Full to Flow Treatment breaches.
- Restructuring plan legal and advisory costs totalled approximately £67.6 million; High Court judge indicated potential refusal if costs had been wholly borne by Thames Water rather than creditors.
- Thames Water supports 500,000+ customers in water poverty via discounts, grants, and payment plans; estimates 139,000 households (4%) currently in water poverty, aiming for near-zero by 2030; plans to increase mains renewal to 550km (AMP8) and over 1,000km (AMP9).
Tone
ProceduralTopics
Key actors
Chris Weston, Sir Adrian Montague, Alistair Carmichael MP, Helena Dollimore MP, Barry Gardigan MP, Thames Water Utilities Limited (TWUL), Ofwat, Environment Agency
Notable line
“"If it had been clear that TWUL would have to bear all of these costs totalling £800 million as the price of extending the liquidity runway until the equity raise could be completed …”
Key Quotes
“Thames Water has an extensive derivatives programme with its purpose being to match our regulated revenues and to protect the company against changes in interest rates, inflation and foreign exchange rates.”
“As at the end of AMP7, we had completed 742 WINEP 7 schemes. We remain committed to carrying out the balance of these projects in AMP8 …”
“On a worst case analysis basis, we estimate that our exposure to fines resulting from EA investigations could be up to £480 million.”
“"If it had been clear that TWUL would have to bear all of these costs totalling £800 million as the price of extending the liquidity runway until the equity raise could be completed …”
“… we estimate that 139,000 households (4% of all billed households) are currently in water poverty. We aim to reduce this to as close to zero as possible by”
“In AMP8 we are aiming to replace 550km of water mains and 317km of sewers, with a further plan to increase the rate of renewal in AMP9 to over 1,000km.”
Source · parliament.uk record ↗