Ofwat has offered provisional backing to £600m of investment, half of which will be funded directly by shareholders, to provide much needed improvements in the resilience of water supplies for Thames Water customers.
According to the water regulator, the money will be spent to accelerate work to reduce leaks and bursts and upgrade hundreds of kilometres of water mains.
David Black, Interim Chief Executive at Ofwat, commented: “Leakages and bursts have a real impact on communities and improvements for customers are long overdue. Almost two years ago we told Thames Water we would support additional investment to improve services if they submitted robust plans and their shareholders co-funded the investment package .
“We are pleased to be making progress towards this extra investment and will continue to make sure that customers’ interests are protected and promoted.”
In their most recent price review, PR19, Ofwat agreed that Thames Water could invest additional money to tackle these major issues, over and above £10bn of investment to improve services which it had already given the green light, if the company’s shareholder also made a major financial contribution and the company developed robust plans to deliver the improvements for customers.
To secure customers’ interests, those plans are scrutinised over multiple stages, the first of which has now been passed.
The plans will then be subject to a further three stages of scrutiny by Ofwat with customer protections also in place to ensure the funds are spent efficiently and the commitments are delivered.
Thames Water shareholders will be investing £300million to match the contribution from customers and Ofwat can confirm that the second stage of additional scrutiny will be taking place later in the year.
Sarah Bentley, Thames Water CEO, added: “We’re delighted to be unlocking this significant extra investment direct from our owners, which are mainly pension funds who all take a long-term view of the company’s infrastructure, customers, and the natural environment.
“They recognise the need for additional investment in London and have approved significant expenditure in the company’s five-year business plan, over and above that allowed under the regulatory price control.
“Reducing leaks and bursts is one of our most important priorities but also one of our biggest challenges, with nearly half of the pipes in London more than 100-years-old.
“We know it’s a priority for our customers too so it’s really exciting to be taking this big step forward with our turnaround plan as we start to build a brighter future.”
Thames Water PR19 final determination can be found on the page 37 of the document, available on the Ofwat website.