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(Sharecast News) - Ofwat is set to appoint LEK Consulting as an independent monitor of Thames Water, the UK's largest water utility, as it faced mounting financial and operational challenges, according to fresh reports on Tuesday.
The appointment, according to Sky News, came after Thames Water lost two investment-grade credit ratings in August, raising concerns over its ability to continue operating under its current licence.
Sky said the downgrades intensified fears of nationalisation, as Thames Water struggled to secure new investment from private backers.
The company, which serves 15 million customers in London and the southeast, was currently negotiating with creditors holding 12bn in debt, with a potential debt-for-equity swap being discussed.
Creditors were also urging Ofwat to show flexibility in its consideration of the company's business plan, particularly regarding customer bill increases.
LEK Consulting's role as an independent monitor would likely provide Ofwat with insight into the steps Thames Water was taking to address its financial and operational shortcomings.
Ofwat had previously expressed concerns over the company's performance in areas such as customer service, sewage, and water leaks.
In response, Thames Water had said it was working on plans for a 1bn emergency liquidity facility to buy more time for a long-term solution.
A rescue plan for Thames Water would need to be finalised by November to avoid government intervention through the Special Administration Regime (SAR), a procedure used during the collapse of Bulb Energy in 2021.
Shareholders, who had already written off their investments, were not expected to play a role in any potential rescue deal.
Attempts to attract new investment, including interest from global funds like Carlyle, were yet to bear fruit, leaving Thames Water's prospects unclear.
Neither Ofwat nor Thames Water had commented on the reports by Tuesday afternoon.
Reporting by Josh White for Sharecast.com.