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Thames Water Utilities Limited ('Thames Water') - proposed undertakings under Section 19

Document Cited in Related
Vincent
Date07 August 2024

Summary of Ofwat’s provisional decision

On 7 August 2024 Ofwat published a consultation notice (the ‘Notice’) setting out our provisional decision to accept undertakings offered by Thames Water Utilities Limited (‘Thames Water’). The Notice followed our finding that Thames Water was contravening Condition P26 of its Instrument of Appointment (‘Licence’), which requires it to maintain, at all times, two Issuer Credit Ratings which are Investment Grade Ratings from two different Credit Rating Agencies.

On 24 July 2024, Thames Water’s Corporate Family Rating was downgraded by Moody’s to Ba2, and on 31 July, its Class A Debt Rating was downgraded by S&P to BB. Both of these ratings are below Investment Grade. As a result, Thames Water no longer held any Issuer Credit Ratings that are Investment Grade Ratings, contrary to the requirement in Licence Condition P26 of the company’s appointment. The proposed undertakings offered by Thames Water sought to rectify the issues which led to the downgrades of its Issuer Credit Ratings, with a view to regaining its Investment Grade Ratings and thereby securing compliance.

Ofwat reached the view, by reference to section 19(1)(b) of the Water Industry Act 1991, that the proposed undertakings were appropriate for the time being for the purpose of securing or facilitating compliance with Licence Condition P26. Accordingly, Ofwat’s consultation proposed accepting the undertakings offered by Thames Water. The consultation the opportunity for...

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