UTILITIES: Thames Water (THAMES Ba2[N]): Water (Special Measures) Bill

We don’t see this as credit impactful, with post-SAR THAMES proceeds very likely to cover government funding. It does appear to pave the way for the UK government to change its stance on the likelihood of SAR which looks inevitable. The bill will provide political cover, assuring the public that taxpayer funds are protected.

• A new bill was introduced to parliament yesterday designed to strengthen Ofwat’s powers.
• It includes proposed updates to SAR for water companies to take it inline with energy. The main change is that the government can recoup any shortfall of its funding from the post SAR entity should sale proceeds at exit be insufficient. It would also be able to levy charges on the entire sector.
• This does not represent the full extent of the government’s ambition with future legislation likely to follow. Much of the bill relates to operational oversight so this does not necessarily imply further adjustments to SAR.