Thames Water has been given a £3billion loan just weeks before it was due to run out of money.
The ruling at the High Court gives the water company, which has come under intense scrutiny in recent months, some time to sort out its finances.
It is currently £16billion in debt and needs £3.3billion over the next five years just to keep it staying afloat for its 16 million customers.
But it has not stopped critics calling for the nationalisation of Thames Water, who says Londoners are paying up to £250 more a year.
Thames Water is essentially borrowing its way out of its own financial problems, something Matthew Topham, Lead Campaigner at We Own It, says will only help in the short-term.
He told Metro: ‘This judgement is nothing but a stay of execution for Thames Water. The privatised company will limp on for a few more months like a profit-thirsty zombie.
‘This crisis loan will keep Thames afloat in the short-term, but their underlying business model is rotten and should be condemned. It relies on piling up debt and raising customer bills so they can pay huge bonuses and dividends – all whilst pumping raw sewage into our waterways.
‘The Environment Secretary, Steve Reed, has the power to put Thames into a Special Administration Regime (SAR) – effectively a form of temporary nationalisation.
‘Under the SAR it’s possible to negotiate a significant reduction in the corporate debt, putting the company on a much better financial footing.
“Once the debt has been slashed, the only long-term solution is full public ownership.’
Thames Water said it would completely run out of money by March 24 if it had not been given the loan.
Mr Justice Leech heard the case in the High Court this morning and said: ‘After taking into account the public interest in ensuring the uninterrupted provision of vital public services, I nevertheless exercise my discretion to sanction the plan.’
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Tom Smith KC, for Thames Water Utilities Holdings Limited (TWUH), told the court that letting it run out of money by not approving the company plan was ‘a risk which cannot be run’.
A group of Thames Water’s Group B creditors and Liberal Democrat MP Charlie Maynard, who opposed the bailout, can appeal against the approval, the High Court also ruled.
The Group B creditors had proposed the same funding but on better terms and recommended these should be adopted.
The company plan was instead approved by creditors holding more than 75% of its Class A debt.
Thames Water chief executive Chris Weston said: ‘We are pleased the court sanctioned the company plan.
‘This is good news for our customers, puts our business on a firmer financial footing, and enables us to continue to invest in our network and deliver critical infrastructure upgrades for our customers and the environment.
‘Importantly, this decision will support the delivery of our turnaround which is underway.’
The loan will cost at least £100million in fees and comes with a 9.75% interest rate.
The water company is seeking to charge people more money to help with its future investment and existence.
This news comes after people across the UK are set to be hit with a 26% rise in their annual average water bill.
This means the average water bill will rise from £480 to £603 – an increase of £123 from April 1 this year.
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