S&P (Standard & Poor’s) has downgraded Thames Water’s Class A debt rating to BB and its Class B debt rating to B. This follows a similar downgrading last week by Moody’s Ratings.
The American based credit rating agency, considered the largest of the big three credit-rating agencies, viewed Ofwat’s draft determination as relatively negative for Thames Water. S&P believes Ofwat’s assessment of Thames Water’s business plan as “inadequate” puts the company at risk of regulatory capital value deductions at the start of the next regulatory period starting in April 2025.
In a statement on the credit rating agency’s website, S&P said:
“In our view, Thames Water’s liquidity has deteriorated to a less-than-adequate position as we forecast that the company will not be able to cover its financial needs by 1.1x over the 12 months from the end of June 2024.
“We have revised our assessment of Thames Water’s business risk profile to strong from excellent. This reflects the difficulties the company is facing in financing its large and inflexible capex, which is driven by regulatory requirements. In addition, the company is also in breach of its current license conditions. As part of Ofwat’s requirements, Thames Water needs to maintain two investment-grade ratings. Ofwat has publicity stated that this would not lead to a revocation of Thames Water’s license.”
