The UK's largest water and wastewater services company, Thames Water is responsible for an extensive water management infrastructure which includes the Thames Water Ring Main around London, one of Europe's largest wastewater treatment works and the UK's first large-scale desalination plant—both at Beckton in east London—and the £4.2 billion Thames Tideway sewer currently under construction. Per day, the company supplies 2.5 billion litres (550 million imperial gallons) of drinking water and treats 4.6 billion litres (1,000 million imperial gallons) of wastewater. It serves a population of 15.5 million people—about a quarter of the UK population—but its ageing infrastructure is prone to leakage and is a frequent cause of pollution, for which it has been repeatedly prosecuted and fined.
Current shareholders include four major pension funds and four overseas investment funds which between them hold over 90% of the company's shares. The company has been criticised for paying substantial dividends to shareholders while simultaneously taking out loans, accumulating £14 billion in debts. In June 2023, Thames Water was reported to be close to financial collapse; while it secured £750m from shareholders in July 2023, the company warned it would need a further £2.5bn from investors by 2030.
Thames Water can trace its history back to the construction of the New River, which was started in 1604 by Edmund Colthurst to carry fresh water from Hertfordshire into London. The business of the New River was taken over by the New River Company, officially founded by royal charter in 1619, under the leadership of Hugh Myddelton. Although earlier small-scale water supply operations existed, the New River Company was the first water supply company and is the earliest direct ancestor of Thames Water today.[1]
During the 1850s, John Snow and William Farr's identification of the 1854 Broad Street cholera outbreak provided a stimulus for the better treatment of sewage. The Thames Conservancy was established in 1857 with unified control over water supply, drainage and navigation. The Great Stink occurred in 1858, and focused government and public opinion on cleaning up the Thames. To resolve these issues, the Metropolitan Board of Works, under the leadership of Chief Engineer Joseph Bazalgette, constructed a large network of sewers by 1870, many of which are still in use today.[2]
In 1904 the New River Company and eight other water companies serving London were taken into public ownership under the control of the newly-founded Metropolitan Water Board. In 1973 the responsibility for water supply and sewage in the Thames catchment was transferred to the Thames Water Authority.[3]
Privatisation
In 1989, the responsibility for navigation, regulatory, river and channels management was transferred from the Thames Water Authority to the National Rivers Authority, which later became part of the Environment Agency.[4] The remainder of the Thames Water Authority was privatised as Thames Water Utilities Limited.[5]
Takeovers
Thames Water plc was acquired by the German utility company RWE in 2001.[6]
On 17 October 2006, following several years of criticism about failed leakage targets in the UK, RWE announced it would sell Thames Water for £8 billion to Kemble Water Holdings Ltd, a consortium led by the Australian Macquarie Group which appointed David Owens as CEO.[7] In December 2006, the sale of Thames Water's British operation went ahead, with RWE keeping the overseas operations.[8]
Under the new ownership, the company re-focused its efforts on improving its operational performance and in 2007 announced the largest-ever capital investment programme (£1 billion p.a.) of any UK water company.[9]
However, during the 11 years of Macquarie's ownership, which ended in 2017, there were substantial dividend payouts to shareholders. In this period debts more than tripled from £3.2bn to £10.5bn (unadjusted for inflation) as Macquarie borrowed against the company's assets to increase dividend payments. During these 11 years £2.8bn was paid to shareholders, 40% of the total £7bn in dividends paid in the 32 years from 1990 to 2022.[10]
From 2017, under the government's Open Water programme, and in common with all water and sewerage companies, Thames Water was required to provide entirely separate retail and wholesale operations for its commercial customers, working through a central market operator.[12]
On 14 March 2017, Macquarie Group sold its remaining stake in Thames Water's holding company to Canadian pensions group OMERS and the Kuwait Investment Authority.[13]
On 22 March 2017 a record fine of £20.3m was imposed on Thames Water after large leaks of untreated sewage, totalling 1.4bn litres, occurred over a number of years.[14]
In its annual report for the year ending 31 March 2022, Thames Water had reported annual revenues of around £2bn, generating a profit before interest, taxes, depreciation and amortisation (EBITDA) of around £1bn (a margin of around 50%).[16]: 36 Facing high levels of asset depreciation - around £650m[16]: 103 - the company has to invest all profits back into the business to maintain the status quo. As of March 2022, Thames Water had, since 2007, accumulated debts of around £15 billion,[16]: 2 [17] mainly through the issue of various bonds, with annual interest obligations of the debt standing at around £500m,[16]: 42 around 50% of EBITDA. So, after capital investments, the business was not generating sufficient cash to fulfil its interest obligations, and found itself in a continuously worsening financial position. With current debt amounting to 80% of the value of the business, Thames Water had become the most heavily indebted of England and Wales' water companies.[18] This situation had been recognised by the regulator Ofwat in December 2022 - leading to increasingly urgent discussions concerning a possible collapse and potential state bail-out of Thames Water.[18]
After joining Thames Water as CEO in 2020,[19] Sarah Bentley resigned on 27 June 2023 amid concerns over spills from Thames sewage pipes.[20] On 28 June 2023, concerns were raised about the company's ability to service its debt of £14 billion,[21][22] and the company was then reported to be in urgent talks to secure extra funding to avoid the company collapsing.[23] In 2022, shareholders had provided an initial £500m to Thames Water and pledged a further £1bn, but the company was said to be struggling to service its substantial debt pile.[23] On 29 June 2023, with the UK government reportedly on standby for a potential taxpayer bailout through a temporary nationalisation,[24][25] with pension funds worried about their investments in the firm,[26] and with suppliers engaged on major projects concerned about payment,[27] Thames Water announced experienced City troubleshooter Sir Adrian Montague would lead rescue efforts, succeeding Ian Marchant as chairman on 10 July 2023.[28] On 2 July 2023, shareholder Universities Superannuation Scheme announced its support for the business's turnaround plans.[29] The head of Ofwat said Thames Water customers would not be liable for the costs of any bailout.[30] On 10 July 2023, Thames Water shareholders agreed to provide £750m in funding,[31] short of the £1bn sought; the company also said it would need a further £2.5bn from investors by 2030.[32]
In September 2023, Thames Water was one of several water companies ordered by Ofwat to pay back customers for poor performance. It was ordered to apply reductions totalling £101m to customers' future bills.[33] In October 2023, Thames Water, along with Southern Water, SES Water and South East Water, was named by Ofwat as one of the four worst performing water companies, all needing to dramatically improve their financial performance.[34]
In December 2023, Thames Water told MPs that it did not have enough money to pay off a £190m loan due in April 2024, despite a recent £500m cash injection financed by a loan to its parent company.[35]
Also in December 2023, the company appointed Chris Weston as its new chief executive, replacing Bentley who resigned in June 2023.[36][37] Weston will take up the position on 8 January 2024 and will be paid an annual salary of £850,000 and a performance-related bonus of up to 156 per cent, taking his total package to about £2.25 million.[36][38]
As of 2022[update], Thames Water extracts, treats and supplies 2.5 billion litres (550 million imperial gallons) of potable tap water per day using 97 water treatment works, 308 clean water pumping stations and 31,100 km (19,300 mi) of managed water mains to 10.2 million customers (4 million properties) across London and the Thames Valley.[39] It maintains 22 raw water reservoirs and 241 underground service reservoirs. The company supplied 111.4 million litres (24.5 million imperial gallons) of treated water per day to other water suppliers in the region.[40] In 2007 it proposed a reservoir at Abingdon, Oxfordshire, which would have been the largest enclosed or bunded reservoir in the UK.[41]
Thames Water also removes, treats and disposes of 4.6 billion litres (1,000 million imperial gallons) of wastewater per day from 15.5 million customers (6 million properties) using 5,123 sewage pumping stations through 109,292 km (67,911 mi) of managed sewerage mains to 353 sewage treatment works across an area of 13,000 km2 (5,000 sq mi) of South England.[40][39] Its Beckton Sewage Treatment Works is one of Europe's largest wastewater treatment works.[42]
On 1 October 2011, it adopted 40,000 km (25,000 mi) - an additional 60% - of private sewers and lateral drains to add to its then stock of 68,000 km (42,000 mi) giving a new network of 108,000 km (67,000 mi). By 2015, this figure had grown to 109,400 km (68,000 mi) of managed sewerage mains. [43][44]
As of 2022[update], Thames Water generated 510 GWh per year, or 24% of its total heat and electricity requirements, using renewable energy from biogas, sewage sludge, wind, and solar. The company has a target of net zero by 2030.[40][45][46][47]
Health and safety
In December 2014 Thames Water pleaded guilty to a charge under the Health and Safety at Work etc. Act 1974 after the death at work of one of its workers. It was fined £300,000 with £61,000 prosecution costs. The incident occurred at its Coppermills Water Treatment Works in Walthamstow, London E17 in April 2010 when an excavator reversed over and killed the worker in a slow sand filter. The prosecution followed an investigation by the Health and Safety Executive.[48]
Leakage
2001–06 (RWE's ownership)
Thames Water was repeatedly criticised for the amount of water that leaked from its pipes by the industry regulator Ofwat and was fined for this. In May 2006 the leakage was nearly 900 million litres (200 million imperial gallons) per day and in June that year Thames Water missed its target for leakage reduction for the third year in a row.[49]The Consumer Council for Water, a customers' group, accused Thames Water of continuing to miss its targets for the preceding five years. In July 2006, instead of a fine which would have gone "to the exchequer", the company was required to spend an extra £150 million on repairs.[50]
Since 2007 (Kemble's ownership)
Thames Water hit its Ofwat-agreed annual leakage-reduction target for each of the ten years running from 2006 to 2016.[43]
In 2006–07, the company stated that it had reduced its daily loss through leaks by 120 million litres (26 million imperial gallons) to an average of 695 million litres (153 million imperial gallons) per day.[51] For 2009–10 the Ofwat-reported daily leakage was 668.9 million litres (147.1 million imperial gallons).[52] In its price control determination for the period 2010 to 2015, Ofwat did not allow the funds needed to finance a significant further reduction in leakage and used the assumption that daily leakage would be 674 million litres (148 million imperial gallons) in 2010–11 and 673 million litres (148 million imperial gallons) from 2011 to 2012.[53] In 2011–12, actual daily leakage was 637×10^6 L (140×10^6 imp gal); in 2012–13, 646×10^6 L (142×10^6 imp gal); in 2013–14, 644×10^6 L (142×10^6 imp gal); in 2014–2015, 654×10^6 L (144×10^6 imp gal); in 2015–2016, 642×10^6 L (141×10^6 imp gal).[43]
The company achieved these reductions by:
better pressure management of known problem sectors of its older water network
replacing 2,736 km (1,700 mi) of worn-out Victorian pipes, mainly under London
These successes in meeting leakage targets mitigated the earlier failures to meet targets. As a result, and in spite of a larger distribution network, Thames Water was leaking slightly less water than at privatisation in 1989, having reduced leakage from its 31,100 km (19,300 mi) network of water pipes by more than a third since its 2004 peak.[54] As of 2013[update] and with an older network profile, Thames Water leaked 25.8%[55] of supply, slightly less than Severn Trent at 27%.[56] As of 2015[update] Thames Water leaked 25.1% of supply.[57]
In June 2018 regulators made Thames Water pay £65 million to customers, among other reasons because they failed to repair leaks.[58]
In June 2023, Freedom of Information requests revealed that Thames Water leak levels were at their highest for five years. It was estimated to be losing 630 million litres (140 million imperial gallons) a day.[59]
In the period 2005–13 Thames Water was the most heavily fined water company in the UK for pollution incidents, paying £842,500 for 87 events. In 2016, it paid the largest fine for a single pollution incident of £1 million.[60] In March 2017, Thames Water was fined a record £20.3 million after it pumped nearly 1.5 billion litres of untreated sewage into the River Thames.[14] The company also admitted other water pollution and offences in Buckinghamshire and Oxfordshire.[61] In awarding the fine, Judge Francis Sheridan noted the company's "continual failure to report incidents" and "history of non-compliance", saying: "This is a shocking and disgraceful state of affairs. It should not be cheaper to offend than to take appropriate precautions. I have to make the fine sufficiently large that [Thames Water] get the message", adding that, "One has to get the message across to the shareholders that the environment is to be treasured and protected, and not poisoned.".[14] What was "shocking and disgraceful" was not just the scale of the pollution, but that it was intentional. Sheridan added "the constant use of flow clipping to protect the treatment process, so that, despite the regular and prolonged discharge of untreated sewage to the River Thames via the storm outfalls, all samples taken at the final effluent outfall complied with the permit. This was deliberately done and gave a false impression of the sewage treatment works’ performance and undermined the operator's self-monitoring process."[62]
Conversely, in 2014, Thames Water admitted that it had accidentally over-reported the number of properties at high risk of sewage flooding between 2005 and 2010. It agreed to a compensation package for customers of £86 million.[63]
In 2022, a report published by the parliamentary Environmental Audit Select Committee on water quality in the UK's rivers showed that Thames Water's Mogden wastewater treatment works in Isleworth discharged a quantity of sewage which would fill 400 Olympic-sized swimming pools on 3 and 4 October 2020.[64]
Other incidents
Thames Water at work in Muswell Hill, London
In September 2007, 5 km (3.1 mi) of the River Wandle, Greater London was polluted. In January 2009, Thames Water pleaded guilty at Sutton Magistrates Court, and was subsequently fined £125,000 at Croydon Crown Court and ordered to pay £21,335 in clean-up and investigation costs.[65] In February 2010, on appeal, the fine was found to be "manifestly excessive" and was reduced to £50,000.[66]
Between 5 and 8 June 2011, more than 230,000 cubic metres (8.1 million cubic feet), or 230,000 tonnes, of sewage were released from Mogden Sewage Treatment works, killing 26,000 fish.[67]
Between 14 and 16 August 2011, Thames Water polluted the Faringdon Stream, in Faringdon, Oxfordshire. The company was fined £10,000 and ordered to pay costs of £4,488 [68]
On 29 October 2011, Thames Water released thousands of tonnes of raw sewage into the River Crane in Greater London, killing thousands of fish, when a six-tonne valve jammed during routine maintenance. Despite tankering and alternative routing, the volume of sewage from Heathrow overwhelmed the operations. Thames Anglers Conservancy's Robin Vernon said: "It will take a decade to repair all the damage done by the sewage spill. Everything in there is just dead now."[69] In 2013, fungus and slime in the River Crane was attributed to runoff of de-icer from Heathrow getting into the river [70] In 2014, Thames Water blamed recent pollution on fat poured down drains by local customers.[71]
On 9 December 2011, Thames Water was fined £60,000 after releasing sewage sludge into the Foudry Brook killing up to 20,000 fish in a three-mile stretch from Silchester, Hampshire.[72]
In September 2012, clogged-up pumps caused sewage to be released into the Chase Brook, near Newbury. A £250,000 fine imposed in August 2014 was adjudged "lenient" on appeal in 2015. The pumps were replaced by improved pumps.[73]
In January 2016, Thames Water was fined a record £1m for polluting the Grand Union Canal in Hertfordshire between July 2012 and April 2013. In addition, it was required to pay costs of £18,000 and a victim surcharge of £120. In its defence, Thames Water said it had spent £30,000 replacing equipment at Tring.[60]
On Christmas Day 2016, the Thames Water Hampton pump failed and as a consequence, thousands of Londoners in the TW and W postcode areas were left without water.[74]
In December 2018, Thames Water was fined £2m for polluting two brooks near Milton-under-Wychwood in Oxfordshire. On 8 and 9 August 2015, raw sewage was discharged into the water, killing 150 fish. It was also forced to pay legal costs of £79,991.57.[75]
In July 2019, Thames Water was fined £607,000 for polluting the Maidenhead Ditch and the River Cut in Berkshire. In June 2014, raw sewage and treated sewage was discharged into the Maidenhead Ditch. Thames Water has a licence to discharge sewage into the watercourse in storm conditions. However, in June 2014 there were no extreme weather events which would allow the company to discharge untreated sewage. The company also did not meet the conditions which would allow it to discharge treated sewage. Another incident of sewage discharge occurred on 7 August 2014. The company was also ordered to pay costs of £100,000.[76]
In February 2021, Thames Water was fined £2.3m for a pollution incident in 2016 that caused the death of 1,200 fish. Untreated sewage with a high ammonia content was discharged into the Fawley Court ditch and stream that flows into the River Thames at Henley-on-Thames. The incident occurred between 21 and 24 April 2016. The incident was caused by a lack of adequate monitoring in place at the Henley treatment works, as well as faulty equipment. Judge Francis Sheridan stated that the pollution and the preceding events showed 'high negligence' on the part of the company. The company was also ordered to pay costs of £87,944[77][78]
In May 2021, Thames Water was fined £4m for a number of pollution incidents which took place between 2016 and 2019 in the Kingston upon Thames area. One of these incidents involved the company allowing approximately 79 million litres of untreated sewage to escape from a manhole cover into Green Lane Recreation Ground, New Malden, a nearby woodland, and the Hogsmill River. Equipment at Thames Water's Hogsmill Treatment Works was unable to withstand the effects of Storm Imogen, and the pumps failed. It took fifteen hours for Thames Water to report the incident to the Environment Agency, as it is legally obliged to do. The company was also ordered to pay costs of £84,669.[79]
In July 2023, Thames Water was fined £3.3m after discharging undiluted sewage into two rivers, the Gatwick Stream in Sussex and the River Mole in Surrey, killing more than 1,400 fish in October 2017.[80]
In 2022, according to a BBC investigation, Thames Water illegally discharged sewage hundreds of times on days when it was not raining. While releasing sewage into rivers and seas is permitted in the UK to prevent pipe systems becoming overwhelmed during heavy or prolonged rainfall, discharging sewage on days without rain is known as "dry spilling", illegal under UK environmental law. Without rainwater, discharged sewage is likely to be less diluted, building up toxins and resulting in toxic algae growths that can be fatal to animals and pose a health risk to swimmers. Dry spilling occurred throughout the summer period when the Thames Water region was declared to be in drought, including on 19 July 2022, the hottest day on record when many people and their pets tried to cool off in rivers. A total of 110 dry spills lasting 1,253 hours were recorded, but the actual number of spills might be higher as only 62% of Thames Water overflow points are monitored, compared to 91% for Wessex and 98% for Southern Water.[81][82]
Local planning
In 2011, the company found itself involved in a controversial redevelopment plan for the Bath Road Reservoir in its home town of Reading. An appeal against Reading Borough Council's rejection of the plan was dismissed by the planning inspector in January 2011.[83] Full planning permission was subsequently granted on 10 December 2012.[84]
Flooding
The exceptional rain and weather conditions of 2013–14 caused swollen rivers and several low-lying areas to be submerged under flood water. In February 2014, the River Ash caused flooding in homes in Staines-upon-Thames. This flooding was exacerbated by a two-day delay by Surrey County Council's 'Gold Control' flood control group in ordering Thames Water to close a sluice gate on a Thames Water aqueduct. Thames Water considered it had been following an existing protocol agreed with Surrey County Council and the Environment Agency.[85]
Sheep
Thames Water maintains commercial flocks of sheep on the borders of several of its reservoirs, which are used as the cheapest way to stop large plants growing and damaging the banks.[86]
Over centuries of London's growth from medieval times to the Victorian age, the natural tributary system of the Thames Tideway was converted first into public open sewers and then closed over into covered sewers which emptied directly into the River Thames.[87]Joseph Bazalgette's remediation of the ensuing 1850s Great Stink renewed much of London's sewerage mains infrastructure during the period 1859 to 1865. However, the new design was not intended to cope with the doubling of London's population over the following 150 years. The concreting of huge amounts of London's green spaces causes substantial rainwater run-off into the drainage and sewerage systems which had been expected to soak into the ground. As a result, even small amounts of rainfall in certain circumstances can cause London's outdated Victorian sewerage system to fail over, and release untreated sewage mixed with rainwater directly into the River Thames.[88]
Each year, on average, there are 50–60 such incidents and a total of 39 million cubic metres (1.4 billion cubic feet), or 39 million tonnes, is released.[89] In 2013–14, exceptional weather conditions and flooding caused a total release of 55 million cubic metres (1.9 billion cubic feet), or 55 million tonnes.[90] The released effluent follows the ebb and flow of the tidal Thames, and can take up to 3 days to exit the Tideway into the Estuary. For this reason, Thames Water advises against swimming in the Thames Tideway[91] and, by extension, walking in the tidal strand area. Despite this pollution, large marine mammals are increasingly found in the Thames Tideway and Estuary, indicating some level of year-on-year improvement [92][93][94]
To mitigate and resolve the above problems, the Thames Tideway Scheme proposed a three-stage series of improvements. The first two stages of the improvements were upgrades to 5 sewage treatment works and construction of the 6.9 km (4.3 mi) Lee Tunnel, formally opened on 28 January 2016.[95] Together, these are expected to result in an annual discharge reduction of 40%. This is equivalent to a reduction of 16 million cubic metres (570 million cubic feet) or 16 million tonnes per year, down to about 23 million cubic metres (810 million cubic feet) or 23 million tonnes of effluent per year.[96] The third stage is the 25 km (16 mi) Thames Tideway Tunnel, which was proposed by the Thames Tideway Strategic Study, including Thames Water, as an effective solution to deal with most of the remaining problem. On 12 September 2014, planning consent was formally approved by the UK Government.[97][98][99] On 24 August 2015, the building contracts were awarded for the western section (Ealing to Hammersmith: £416 million, to BAM Nuttall, Morgan Sindall and Balfour Beatty), the central section (Hammersmith to Tower Bridge: £746 million, to Ferrovial and Laing O'Rourke) and the eastern section (Tower Bridge to Stratford and Greenwich: £605 million, to Costain, Vinci and Bachy Soletanche).[100] On 3 November 2015, Bazalgette Tunnel Ltd received its operating licence from OFWAT, ensuring the start of the project.[99]
The necessity for action has added urgency because of imminent water quality fines of up to £1bn by the European Commission on the UK Government.[101][102]
^Halliday, Stephen (2013). The Great Stink of London: Sir Joseph Bazalgette and the Cleansing of the Victorian Metropolis. The History Press. ISBN978-0752493787.
^"Bye-bye big stink"(PDF). Beckton in Focus, The Newham Mag, London Borough of Newham. April 2010. Archived from the original(PDF) on 18 August 2012. Retrieved 9 March 2013.
