Thames Water - comment

The Labour government plans to appoint an independent commission to review the position and functioning of Ofwat who allowed the regulated debt to pile above the current value of the company, which is depressed on enlarged (catch-up) CapEx requirements and political limits to how far the public should foot the bill via higher water bills. None of it should undermine the momentum of a UK RP process, although we wonder if it will slow down negotiations for water bill rises or specific CapEx requirements - the two goalposts for Thames Water’s valuation - as cash flows afford only limited time now to conclude its recapitalisation. 

This approach from the government separates solving the structural issues at the regulator from the balance sheet restructuring at Thames Water. Creditors should therefore prepare to restructure the balance sheet without a clear economic forecast.