Thames Water: Rishi Sunak advisor parachuted into collapse contingency talks

Rishi Sunak has reportedly tasked his business adviser with overseeing talks regarding the Thames Water crisis amid risk of collapse.

The Prime Minister’s special adviser on business and investment, former Morgan Stanley executive Franck Petitgas, has been parachuted into talks, according to the Financial Times. 

It comes as the government appears fearful over the risk of the potential collapse of Britain’s largest water firm, which serves around a quarter of the UK’s population.

Talks are ongoing between water regulator Ofwat, Thames Water and the environment department Defra, which are reportedly known as Project Timber, as the government tries to secure contingency plans in case of the utility’s failure.

One option could see it brought into temporary renationalisation, under the government’s special administration regime.

It follows higher interest rates sparking an emerging financial crisis for Thames Water which is servicing an £18bn debt pile.

The FT reported investors have agreed a further £3.25bn in equity over the next five years, but this requires concessions from Ofwat, including steep rises to water bills and caps on sewage pollution fines. Investors also want to continue to receive dividends

Petitgas, who was born in France and retired in 2022 after almost three decades at the top US investment bank, became Sunak’s business aide in April 2023.

Thames Water is owned by various investors including pension funds Omers and USS and Abu Dhabi and Chinese sovereign wealth funds.

Ofwat is also investigating a £37.5m payout by Thames Water in October to its parent company, Kemble, in spite of environmental failures. Kemble also needs to refinance a £190m loan by the end of April. It relies on Thames Water dividends to service borrowing.

The water firm is being advised by EY and Teneo, while environment secretary Steve Barclay will be questioned over negotiations at the environment select committee next week.

A Downing Street aide told the FT the Thames Water talks were officially being led by Defra. A government spokesperson reportedly said: “We prepare for a range of scenarios across our regulated industries – including water – as any responsible government would.”