Uma limpeza do estado pode ser a melhor aposta para a água do Tamisa | Nils Pratley

C III Will the High Court allow Thames Water to take on another £3bn of debt on top of its already unsustainable £19bn debt pile? Will the company appeal to the Competition and Markets Authority to try to push the bill higher than the pre-inflation 35% figure sanctioned by the regulator? Will special administration, also known as temporary nationalisation, loom at the end of next month?

The answers to the first two questions should emerge next week. In the meantime, here comes a subplot that would otherwise be the main event: Ofwat will investigate whether Thames breached its obligations by failing to provide environmental updates on time.

But actually this latest investigation is revealing, because it says a lot about how deep the crisis on the Thames, which has been at least a decade in the making, is. It’s not primarily about the ridiculous levels of borrowing; it’s about the company’s basic inability to do the day-to-day work of fixing the infrastructure.

The first feature to note is the scale of Thames’s shortfall in delivering projects, which cover everything from phosphorus removal to sewer upgrades. It is huge. Thames was due to complete 812 schemes between 2020 and 2025 – and “more than 100” are unlikely to be completed on time, with the deadline six weeks away. As far as we know, no other water company is so far behind schedule. Thames blames “cost increases higher than the rate of inflation applied to our subsidies”, but these cost increases will not be a South East phenomenon.

Second, the facts have emerged in slow motion. Thames was having internal deliberations about scaling back environmental works as early as late 2021 and throughout 2022, the Guardian reported last December, but its formal notification to Ofwat was only made in August 2023. And now it is now – 18 months later – that the regulator is opening an enforcement case. Yes, Ofwat must follow due process, but the regulatory wheels take an age to turn.

Third, Thames somehow thought it appropriate to continue paying dividends – £37.5m in 2023 and £158m in 2024 – on its holding company, even after telling OF Wat that it was nowhere near meeting its binding targets. The regulator jumped on this manoeuvre, proposing an £18m penalty plus clawback last December, on the grounds that the payments could not be justified by performance measures. But again, the striking feature was the gulf between Thames’s performance on the ground and its board’s view that the dividends were fine. It’s a mindset that tries to push the crisis around the next corner.

And that is certainly where we are again with the High Court proceedings. A thumbs-up for a £3bn emergency loan buys time to pursue a restructuring that would involve haircuts for bondholders and, it is hoped, the bringing in of new shareholders. If such a deal emerges in the summer, prepare to hear it hailed as yet another “fresh start”, the phrase overused by Thames’s changing executive line-up over the years.

At this point in the never-ending game, however, one must be wary of any “creditor-led” solution in which the creditors’ primary motivation is to find a way to minimize their losses. The priority should be to upgrade Thames’ operations, the issue lost in the legal drama. Special administration is not guaranteed to provide the necessary jolt—but it may be the best bet at this point.