Rachel Reeves has instructed buyers she want to see a “market-based answer” for issues at Thames Water, fairly than putting the corporate into particular administration.
The chancellor despatched a letter in July to the Thames Water creditor group, which represents about 100 monetary establishments which might be making an attempt to create a rescue plan for the corporate.
Reeves despatched the letter after feedback from the surroundings secretary, Steve Reed, in June. He instructed MPs the federal government had “stepped up our preparations and stand prepared for all eventualities … together with [a] particular administration regime if that had been to turn out to be crucial”.
The remarks are reported to have induced concern amongst some debt-holders within the water trade, as such steps would contain a short lived type of nationalisation, resulting in the restructuring of its £17.7bn internet debt and the potential sale of the corporate to new house owners.
Within the letter, seen by the Instances, Reeves wrote: “The federal government recognises the seriousness of the state of affairs going through Thames Water … Our place stays that the corporate ought to discover a sustainable, market-based answer to the present state of affairs.
“This answer should not solely safe the corporate’s long-term monetary stability but in addition ship a profitable turnaround that achieves constructive outcomes for purchasers and the surroundings.”
Nevertheless, she echoed Reed’s earlier remarks, writing: “The federal government is ready for all eventualities throughout its regulated industries and has undertaken detailed contingency planning for a particular administration regime, ought to this be required to make sure the continued provision of important public providers.”
Thames Water has been beneath the efficient management of its senior collectors, which maintain most of its debt pile since shareholders walked away from the corporate final 12 months.
The water firm, which serves 16 million clients throughout London and the south-east, has been on the verge of monetary collapse for a number of years, after many years of underinvestment and dividend extraction.
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Thames has desperately been searching for a approach out of the turmoil with out the federal government being pressured to take management beneath a particular administration regime, which is basically momentary nationalisation. Final month it emerged the federal government had engaged the advisory agency FTI Consulting to take a look at its choices, together with particular administration.
The federal government is planning to abolish Ofwat, which may end in additional issues as rival water firms may additionally think about authorized motion if Thames secures a beneficial deal not obtainable to them.
The federal government was approached for remark.
