Ofwat Releases Final Determination for 2024 Price Review: More Trouble for Thames Water

The UK's Water Services Regulation Authority (Ofwat) released its Final Determination (FD) on its 2024 Price Review. The FD sets out the UK water and wastewater utilities' revenues and expenditures over the next five years (2025 to 2030).

Key highlights include the following:
-- The FD, which includes substantial increases in spending for heightened environmental concerns, will require significant equity and debt funding for the utilities.
-- Ofwat also issued a GBP 18.2 million penalty on cash-strapped Thames Water, which is currently looking for approval from its debtholders to grant an emergency GBP 3 billion cash line.

"Overall, we continue to view the regulatory framework under Ofwat as transparent, but with increasingly tough delivery outcomes and stringent environmental standards to meet," said Tom Li, Senior Vice President, Sector Lead of Corporate Ratings, Energy & Natural Resources at Morningstar DBRS. "While the FD will now provide certainty of earnings and cash flows over the next five years, we believe the UK water utilities will still face considerable challenges over this period given the heightened environmental concerns and large funding needs for their capital programmes."