Will taxpayers foot the bill if Thames Water goes bust?

Britain's largest, and most indebted, private utility, Thames Water, has been in financial difficulties for some time and has now been given another reprieve by the High Court.

- SEAN O'GRADY

A judge has approved the company borrowing a further £3bn but the prospects for the company remain uncertain. It is quite possible that, at some point, it will fail and have to be nationalised. What that entails for the government, and how much it will cost the taxpayer, are questions that have been intensively studied in Whitehall for some time. There will be political consequences.

Why go to court to take out a loan?

Normally, a company wouldn’t, but Thames Water is no ordinary concern. Loaded now with some £19bn of debt, its financial prospects are poor, and the loan is designed to give it some breathing space to arrange a more substantial financial reorganisation and to appeal to the regulator, Ofwat, and ultimately ministers to permit it to ramp up charges and limit needed investment. The plan is backed by one group of creditors, but another group challenged its validity and took the case to court. The opponents argued that the cost of the loan – 9.75 per cent interest – was said to be too high. The judge used his discretion he says, in the public interest to approve the loan.

Who would provide such a sum of money?