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Thames Water, the UK utility struggling under nearly £20bn of debt, has said that chief financial officer Alastair Cochran will step down at the end of this month.
The utility, which serves 16mn people across London and the Thames Valley, is facing a cash crunch that could leave it with as little as £39mn by the end of March, as suppliers step up demands for prompt payment.
It recently agreed a £3bn emergency loan from senior creditors but cannot begin to access the money before early April. The loan could also still be subject to a challenge in the supreme court from a rival creditor group or environmentalists led by the Liberal Democrat MP Charlie Maynard.
Thames Water’s chair Sir Adrian Montague said Cochran had led the work to put the utility’s finances on a “more stable footing” and that he had laid laying the foundations for the “wholesale recapitalisation of the business”.
Stuart Thom, director of group finance, has been asked to act as interim chief financial officer until a longer-term replacement is found, the company said on Friday. Cochran, who has been with Thames Water since 2021, is also stepping down from the utility’s board. A successor would be announced in due course, the company said.
Although Cochran’s departure was unexpected, the existing management, including chief executive Chris Weston and the board, were widely tipped to be replaced as part of a recapitalisation of the water utility later this year, said a person close to the creditors. The bidders were expected to brief headhunters within the next few weeks, the person added.
Another person close to the business said everyone would want to “draw a line under the past” and reset the company. “If Cochrane hadn’t gone now, he would have gone later,” the person said.
Cochrane’s exit comes as the company seeks to raise billions of pounds of equity to avoid being taken over by the government under its special administration scheme.
Its existing shareholders, which include the Chinese and Abu Dhabi sovereign wealth funds as well as pension funds USS and Omers, last year walked away from the business and declared it uninvestable.
Potential bidders so far include KKR, CKI Infrastructure, Castle Water and Covalis, with a shortlist due next week. Thames Water is hoping that a deal will be agreed in June ahead of a final restructuring by September. However, there have been indications that several of the bidders are asking for leniency on regulatory fines and other measures as part of any deal.
The creditors, which represent £12bn of the company’s debt and include the hedge funds Elliot and Silverpoint as well as household names M&G and BlackRock, have also said that they will do an equity deal if the other bids fail to materialise.
The £3bn loan comes at an expensive 9.75 per cent interest rate, as well as fees and is expected to cost Thames Water at least £800mn in interest. About £15mn a month is leaking out of the business in paying creditors’ fees, part of a wider bill from lawyers, consultancies and advisers engaged in the restructuring process.
The company and its creditors are seeking to avoid renationalisation under the government’s special administration regime. In that event, the debt interest would be frozen, freeing up cash for investment in infrastructure until new buyers could be found.
Thames Water has admitted that its ageing assets pose a “risk to public safety”, while most of its sewage treatment plants lack the capacity to deal with the needs of the local population.
Its customers are facing a steep 31 per cent increase in bills, which will see average household bills rise on average by £151 to £639 from April, with further rises over the next five years.
Maynard on Friday called for environment secretary Steve Reed to ask the courts to put the company into special administration.
Cochrane’s departure made Thames Water’s position “ever more untenable”, the Lib Dem MP said.
