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Dutch bank ING is main lender to Thames Water parent as cliff edge looms

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Dutch banking giant ING has played a central role in determining the future of struggling parent company Thames Water amid growing expectations that lenders will agree to a loan extension before the refund deadline this month.

Sky News has learned that ING is among lenders expected to be repaid £190 million by Kemble Water Finance at the end of April.

A major Chinese bank would also hold a significant position in this loan facility, according to banking sources.

The identity of the lenders has not been previously disclosed.

If the loan is not repaid and Kemble Water Finance defaults, the company risks being placed into administration, deepening the crisis facing Britain’s largest water company.

Such a move would, however, have no direct impact on water and sewerage services provided to Thames Water’s 15 million customers in London and the south-east of England.

ING declined to comment on Thursday.

Kemble was unable to repay the £190 million loan due to a regulatory hold on dividends paid to it by the Thames Water operating company.

Sir Adrian Montague, the City chief executive who was parachuted in as chairman of the utility last year, admitted to MPs in December that the company was unable to meet its obligations under the deal loan.

Industry insiders, however, said they were cautiously optimistic that the loan union would extend the April 30 repayment deadline.

Thames water (Kemble) Finance said last week it plans to “approach its lenders and bondholders and request continued support in order to provide a stable platform while they engage with all stakeholders keys”.

He added that Alvarez & Marsal were hired to advise on these discussions.

The simmering crisis at Thames Water erupted last week when Sky News exclusively revealed that its shareholders had decided not to proceed with a promised £500 million injection into the company amid a standoff with Ofwat, the sector regulator.

The two sides have failed to agree on a business plan that generates sufficient financial returns for investors – which include the university pension plan, China’s sovereign wealth fund and a major Canadian pension fund – leaving Thames Water faces a financial abyss.

Thames Water shareholders had indicated they were prepared to commit £3.25 billion to the business in the coming years, with the first £750 million expected to be injected this year, including £500 million by the end of March.

The company employs around 7,000 people and serves almost a quarter of the UK population.

However, it is drowning under more than £18 billion of debt, with huge interest payments needed to service it.

This week, its credit rating was downgraded, moving closer to junk status by rating agency Moodys.

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The utility has asked for concessions, including a 40% increase in consumers’ water bills, relaxation of capital spending requirements and leniency on upcoming regulatory sanctions.

Last summer, Sky News revealed Whitehall officials had begun drawing up contingency plans for the collapse of Thames Water, fearing the company would not survive.

However, in an investment plan unveiled in October, the company said its shareholders were “mobilizing to support… much-needed investment, underlining their commitment to ensuring the recovery of Thames and the essential life service for the benefit of our customers , communities and the environment. .

“Shareholders have already invested £500 million of new funds in 2023,” he said at the time.

“In addition, they have agreed to provide a further £750m in new equity… subject to certain conditions being met, including the preparation of a business plan which underpins a more targeted turnaround which delivers improvements targeted performance for customers, the environment and other stakeholders over the next three years and is supported by appropriate regulatory provisions.

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Gove: Thames Water leadership a ‘disgrace’

If Thames Water ends up collapsing, temporary nationalization would involve placing the company’s operational activities into a special administration regime (SAR) similar to that used during the collapse of energy supplier Bulb in 2021.

This would spark concerns within government that triggering a SAR could ultimately cost taxpayers billions of pounds.

The company has been plagued by management turmoil, with Sarah Bentley, its chief executive of three years, resigning last summer.

She was replaced by Chris Weston, the former head of Aggreko.

He expressed optimism last week that a compromise deal with Ofwat could be reached this year.

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Thames water under threat

The financial peril Thames Water finds itself in has prompted calls from critics of the privatized industry to renationalise all major UK water companies.

A number of companies have been forced to seek additional funding from their shareholders, with the situation in the water sector likely to be the focus of the general election campaign.

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