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Chinese banks will decide the fate of Thames Water amid warnings that the country will default on its debts.
Foreign lenders, including state-owned Bank of China and the Industrial and Commercial Bank of China, are among the consortium that lent money to the utility group’s parent company Kemble Water.
Thames Water, Britain’s largest water company, must repay £190 million to banks by the end of April.
But the company is at risk of missing the deadline after shareholders refused to hand over additional cash.
If the repayment date is missed, it will be up to lenders – which also include ING and Allied Irish Bank – to extend the deadline or put Thames Water, which has 16 million customers, into administration.
Debt burden: Thames Water, Britain’s largest water company, must repay £190 million to banks by the end of April
The banks have so far refused to grant the loan without new funding from Thames Water’s owners.
Meanwhile, ratings agencies have downgraded the debt-laden company amid a mounting cash crunch.
The water supplier has £18 billion in debt and is facing sky-high interest payments.
Fitch Ratings yesterday downgraded Thames Water holding company Kemble Water Finance’s debt deeper into junk territory, warning that ‘some form of default was likely’.
Meanwhile, S&P downgraded the utility’s bonds and Moodys downgraded its credit rating to junk status.
It comes after Thames Water announced last week that its shareholders will not hand over the promised £750 million. The company – which wants to increase customer bills by 40 percent – could be nationalized if it cannot attract new financing.
Shareholders were due to hand over the first tranche of £500 million at the end of March.
However, the investment was subject to the company’s approval by regulator Ofwat, including a huge increase in customer bills.
Ofwat blocked the increase, refusing to relax capital expenditure requirements and waive fines for failing to meet targets.
The utility, which supplies water to households in London and the south-east, is at risk of being put into special administration if it cannot find extra money before the end of next year.
Former Tory leader Iain Duncan Smith said Chinese influence over Thames Water was worrying. “Water is the most basic asset of the whole bunch,” he said.
Ofwat said last week that the company ‘must now pursue all options to seek greater equity for the business and improve the company’s performance for customers’.
The regulator and the company stressed that water supplies to Thames Water customers will not be affected.
Thames Water is in the firing line due to its high debt levels, poor customer service and sewage leaks in Britain’s waterways.
The group was plunged into crisis when Sarah Bentley resigned as CEO in June last year amid mounting fears over its financial stability.
Chris Weston, the former director of British Gas, was hired in December and promised to deliver a turnaround plan.