Southern Water plans to borrow £4bn amid Thames Water crisis

In the UK, Southern Water is planning to borrow up to £4 billion from investors over the next five years, as it seeks to address financial challenges and support its revised business plan. The company aims to raise approximately £3.8 billion in debt and an additional £650 million in equity. This move comes amid a crisis at Thames Water, its struggling rival, which is facing £15 billion in debts and uncertainty regarding its future. Southern Water, which serves 2.7 million customers in the south-east, has already raised £1.6 billion in debt and equity over the past financial year, aided by its majority owner, Macquarie Asset Management. The Australian firm had previously provided a £1 billion cash injection in 2021 to help Southern avoid potential renationalisation. The financial difficulties of Thames Water have created a challenging environment for utility companies in the UK, as they navigate regulatory pressures and the need for increased funding. Thames Water's situation worsened after shareholders withdrew support for a £500 million emergency funding plan, leading to concerns about its operational viability. The company has since managed to extend a revolving credit facility, providing temporary relief as it seeks a long-term solution. Southern Water's proposal to increase household bills to £734 by the 2029-30 financial year has drawn criticism, as it aims to manage affordability through discounts for struggling customers. The company’s original business plan was deemed inadequate by the regulator, Ofwat, prompting the need for a revised approach to secure necessary funding and maintain service levels.