Uk's Thames Water Says Regulator's Proposed Cuts Untenable

(Reuters) - Britain's largest water provider Thames Water said on Wednesday that the expenditure cuts proposed by the water regulator were not tenable and would deter investment, as the utility struggles with debt and risks being nationalised.

Thames Water's statement came after Britain's water companies' lobby warned that watchdog Ofwat's recent proposals to meet environmental targets within the allowed increase in customer bills could also put off investors.

In July, Ofwat told water companies they would be allowed to increase average bills by 21% over the next five years, not as much as the companies wanted to modernize infrastructure, accommodate UK population growth, and tackle climate change-induced droughts and storms.

The British water utility added that it had significant concerns in wastewater, where Ofwat had halved its proposed enhancement expenditure and set targets that were beyond reach.

Thames Water's bonds fell after the utility said the proposed cuts would make its current business plan uninvestible.

"This would leave us with a multi-billion pound gap between what we are allowed to charge our customers and what is needed to deliver against the ambitions that customers and stakeholders have set for us," the company said in a statement.

The heavily indebted Thames Water is at the centre of a crisis in Britain's water sector over the amount of sewage being dumped into rivers and seas and crumbling pipe networks.

The utility, which provides water to roughly a quarter of British households and has around 18 billion pounds ($23.76 billion) of debt, wanted to hike bills by a total of 191 pounds over five years, but Ofwat said it would allow a rise of 99 pounds.

Lobby group Water UK said in a letter to Ofwat's CEO David Black that the industry could not meet the watchdog's targets.

"Ofwat must stop repeatedly cutting investment plans to the point they are no longer viable while, at the same time, holding companies to increasingly unachievable targets that set the sector (and Ofwat) up to fail," it said.

Thames Water said it had provided evidence to Ofwat outlining how it could meet customer expectations while maintaining its viability.

($1 = 0.7575 pounds)

(Reporting by Prerna Bedi, Yadarisa Shabong and Radhika Anilkumar in Bengaluru; Editing by Vijay Kishore, Mrigank Dhaniwala and Ros Russell)