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Thames Water has been handed a £750m lifeline in its battle to avoid nationalisation but has fallen short of its £1bn fundraising target.
Shareholders have agreed to inject more cash into the ailing utility company as it battles to shore up its finances.
However, the sum raised is less than Thames Water were targeting and bosses admitted it will need £2.5bn by 2030 to fund its turnaround plan.
The new commitment from investors also comes with strings attached, which are likely to include higher bills for customers and higher performance demands.
The £750m will help to ease immediate pressure on Thames Water’s finances, which were put under scrutiny last month after chief executive Sarah Bentley left her role with immediate effect and it emerged the utilities company was struggling to service its £14bn debt pile.
Ministers have drawn up emergency nationalisation plans for the struggling business as a last resort but interim-chief executive Cathryn Ross told the BBC’s Today programme the company was “absolutely not” on the verge of a special administration.
Ms Ross said: “You have to remember that all utility companies operate under a regime where there is this nuclear option - this very extreme safeguard called special administration.
“There is a very high bar before the Government puts any company into special administration.”
Details of Thames Water’s fundraising plan were revealed in the company’s annual report. The utility business lost £30.1m for the year to the end of March, down from £973m a year ago.
Penalties for missed targets on water quality, leaks and other measures surged from £35.5m to £82.3m, it said.
The report also revealed that Ms Bentley received more than half a million pounds last year to make up for bonus payments due from her former employer Severn Trent.
Thames had £4.4bn of cash in the bank and committed funding at the end of March. The £750m cash injection, which will be doled out by owners including Ontario Municipal Employees Retirement System, the UK’s Universities Superannuation Scheme and China Investment Corp, will be handed over by April 2025.
In an update to shareholders, Thames Water said: “This further funding is subject to satisfaction of certain conditions. This includes the preparation of a business plan that underpins a more focused turnround that delivers . . . performance improvements for customers, the environment and other stakeholders over the next three years.”
Last week, David Black, chief executive of Ofwat, warned a House of Lords committee that the sums Thames is seeking to raise will not be enough in the long run, citing the need to “de-gear” the business – jargon for bringing down debts – and improve performance at the same time.
He said that Thames was struggling to raise the initial funds because investors are “concerned” about its turnaround plans.
Mr Black, who has been a senior figure at the regulator since 2015, admitted that Ofwat should have acted sooner to stop water firms from loading themselves up with huge mountains of debt.
Since privatisation in the late 1980s, the water industry has built up more than £60bn in borrowings and paid out more than £70bn in dividends.
Thames, which supplies 15 million households in London and the South East, was bought in 2006 by a consortium led by private equity giant Macquarie. The Australian investment company was subsequently criticised for overseeing growth in Thames Water’s debts while £2.7bn was paid out in dividends. Macquarie no longer owns a stake in the company.
Last week, Thames Water was handed a £3.3m fine for a “reckless” incident in which millions of litres of undiluted sewage were pumped into rivers near Gatwick Airport six years ago.
A two-day sentencing hearing at Lewes Crown Court was told there was a “significant and lengthy” period of polluting the Gatwick Stream and River Mole between Crawley in West Sussex and Horley in Surrey on October 11, 2017.