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Thames Water warns of a funding gap, but profits are on stream despite slump

UTILITY Thames Water said yesterday it was facing a potential gap in funding as the downturn threw up a series of &ldquo;significant challenges&rdquo; for the industry.<br /><br />Soaring bad debt and the increasing cost of financing &ldquo;will make it more difficult to fund the essential investment in the network that is required,&rdquo; it said yesterday, as it put out its interim results.<br /><br />Thames, the biggest water group in the UK, had been planning on putting &pound;5.5bn into the water network between 2010 and 2015. It had intended to fund the move with a 17 per cent rise in bills before inflation, but the plans were scuppered by industry regulator Ofwat&rsquo;s ruling last week, which said it could only increase bills by three per cent.<br /><br />The company&rsquo;s pre-tax profits grew by 15 per cent to &pound;225.5m in the six months to September, despite the downturn, while revenues went up by four per cent to &pound;805.6m on the back of price hikes. <br /><br />Thames said it had met its leakage targets for the third year in a row, in spite of a severe winter, which caused a big hike in the number of burst pipes.<br /><br />The group&rsquo;s chief executive David Owens also said he was stepping down, &ldquo;having reached the important milestone of receiving Ofwat&rsquo;s Final Determination&rdquo; price setting. <br /><br />Owens has been in the position since December 2006.