Thames Water rescue deal should be rejected - MPs

**Thames Water rescue deal should be rejected - MPs**

Thames Water serves 16 millions customers across London and the Thames Valley

A cross-party committee of MPs has called on the government to turn down a £10bn takeover offer from Thames Water's creditors.

The UK's biggest water company owes about £20bn and has been in discussions with creditors and government officials.

A report from the Environment, Food and Rural Affairs (EFRA) Committee said the government should now consider putting it into special administration, a temporary form of nationalisation.

A Thames Water spokesperson said the company needed to be "recapitalised and put on a firm financial footing".

Concerns that the firm, which serves 16 million customers, might collapse first surfaced three years ago.

The committee said a takeover plan from a consortium of more than 100 of its creditors did not have "the interests of the public, the company or the environment at heart".

The proposal had been viewed as the last realistic way to avoid a special administration regime, after an earlier deal with a US private equity giant fell apart.

Creditors, who together hold around £17bn of Thames Water's debt, had already been told by former environment secretary Emma Reynolds that their plan did not do enough to protect customers or the environment.

The new report said Thames Water, along with other "poor-performing" water companies, was caught in a "doom loop" of fines for poor performance, leaving it with less money to spend on improvements.

It warned that the company would "likely accrue" more than £900m in penalties over the next five years.

The committee said the law needed to change so the government could trigger a special administration on performance grounds alone.

It also warned that the bidders, known as London & Valley Water, were primarily focused on "extract immediate value from Thames Water, not steer it to long-term success".

Alistair Carmichael, chairman of the committee, said: "We believe Thames Water can be turned around, but not by giving the keys back to the people who have been joy riding in the family car.

"The government should reject offers from the company's creditors in return for relief from fines for pollution and poor service."

Carmichael said "liabilities that the government will face in the short-term" could be recovered through a future sale of Thames Water once its finances and performance had improved.

He added: "The chaos of another Thames Water-style saga must not be repeated."

A spokesman for London & Valley Water said: "This group of investors has never been in control of the company and has never received a dividend from Thames Water.

"They have stepped in to fund a significant revenue shortfall to ensure Thames Water's record capital investment programme can continue without disruption."

He added: "Our enhanced proposal will address all feedback from Ofwat and ministers and is the fastest route to fix Thames Water's complex problems."

A Thames Water spokesperson said: "Turning Thames Water around will take a decade and require significant and sustained investment, but we are already making progress and this is a different business from the one it was two years ago."

They added: "Anything that delays the recapitalisation risks slowing the turnaround, disrupting investment and increasing the cost of delivering the improvements our customers and the environment need."