Chinese banks could become shareholders in UK’s Thames Water
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The news: Two state-owned Chinese banks are part of a group of lenders involved in a stand-off over debt at Thames Water’s parent company, Kemble Water Finance.
The numbers: Shareholders in Kemble Water Finance last week announced that they would be unable to repay a £190 million ($363.83 million) loan when it matures at the end of April. The UK’s biggest water utility is facing a debt crisis, currently shouldering approximately £15 billion in debt which amounts to around 80% of the business’ value.
Last week, Thames Water shareholders (Including Chinese sovereign wealth fund CIC) refused to pay £500 million to stabilise the utility’s finances, leading the provider to admit that it would need to secure more funding by late next year or risk nationalisation.
The context: The two Chinese lenders, Bank of China and Industrial and Commercial Bank of China (ICBC), are part of the group which has refused to extend the £190 million loan without new equity. Allied Irish Banks and ING are also part of the group. If Thames Water defaults on the loan, the two Beijing-owned banks could become shareholders.
While Thames Water says it could survive for the next 15 months on a reported £2.4 billion in current liquidity, it would need to secure over £3 billion in equity by 2030 and a sharp increase in customer bills to maintain services and deliver improvements.
UK Prime Minister Rishi Sunak has rejected calls to provide a government rescue package, arguing that the Thames Water needs to resolve their problems on their own.
The sources: Financial Times, Bloomberg
