The tide is turning on Thames Water: special administration looks best | Nils Pratley

A t last, Emma Reynolds , the environment secretary, has opined on the future of Thames Water. So what’s it to be? A takeover by the company’s creditors? Special administration, which would allow anyone to pitch up with an offer while the state temporarily funds the company? Or even a quick flush to full nationalisation? Well, two years after Thames’s shareholders walked away, and 18 months after the creditors opened talks with regulator Ofwat on the terms on a potential recapitalisation, one still can’t say definitively what the government wants. But we do have a better idea: the political mood seems to be shifting firmly towards administration. Reynolds outlined three concerns with the creditors’ proposed rescue deal : “The unfair cost to customers; delays to vital infrastructure investments; and delays to environmental improvements.” They were labelled her “early views”, which kept open the possibility she could revise them, but the hurdle to doing so feels high. Questions of cost to customers and delay are fundamental; none looks easy to fix via one more round of negotiation. Indeed, Reynolds’ statement that “I’m not convinced about the proposal’s request to reduce performance standards” struck at the core of the creditors’ proposal. Regulatory relief for four years from potential performance penalties has always been at the heart of what they are seeking. Special administration now looks the most likely outcome for three reasons. …