Thames Water agrees £122m fine payment plan - as future hangs in balance

Cash-strapped Thames Water has agreed a payment plan with regulators to cover off a record fine that threatened to exacerbate its financial difficulties.

Britain's biggest supplier was to pay £24.5m of the £122.7m sum by 30 September under the agreement. Ofwat, which imposed the penalty in May for breaches of its rules over sewage discharges and dividend payments, said the balance would be due once a rescue financing deal was agreed or if it was placed into a special administration regime by the government.

Money latest: Should I fix? Reaction to energy price cap shift Sky News revealed earlier this month that Steve Reed, the environment secretary, had signed off on the appointment of FTI Consulting to assist with contingency planning for putting Thames into a special administration regime. It further meant that FTI was the frontrunner to act as the company's administrator, should Thames fail to secure its private sector bailout.

Sky's City editor Mark Kleinman said that the deal on the table, that would see Thames's lenders injecting about £5bn of new capital and writing off roughly £12bn of value across its capital structure, was potentially dependent on Ofwat's handling of the water firm's fines. Thames has argued it needs financial space to guarantee its turnaround.

Thames initially had until 20 August to pay the £122.7m sum, but it requested the agreement of a payment plan. Ofwat's deal with Thames only kicks the can down the road.

Read more:Warning of six million new cancer casesSpaceX completes spectacular test flightGWR highlights some unclaimed world records The regulator said on Wednesday that it had set a "backstop date" of 31 March 2030 for the remaining penalties. Thames Water said the fines would not be paid for out of customer bills.

It added: "The company continues to work closely with stakeholders to secure a market-led recapitalisation which delivers for customers and the environment as soon as practicable." The agreement was announced as the water watchdog prepares to be abolished under government plans to bolster oversight of the industry. Lynn Parker, senior director of enforcement at Ofwat, said: "This payment plan continues to hold Thames Water to account for their failures but also recognises the ongoing equity raise and recapitalisation process.

"Our focus remains on ensuring that the company takes the right steps to deliver a turnaround in its operational performance and strengthen its financial resilience to the benefit of customers.".