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(Sharecast News) - Thames Water posted a surge in annual profits on Wednesday after customer bills rose sharply, but warned there remained "material uncertainty" about its future as debts continued to mount.
Underlying revenues swelled by 39% in the year to 31 March to 3.6bn, while pre-tax profits came in at 321.1m on the same basis, up from last year's 6.2m loss. The average combined bill for 2025/26 was 656.
On a reported basis, pre-tax profits were 226.4m, compared to last year's record 1.6bn loss. However, the group's debt piled also continued to grow, rising to 18.5bn from 16.8bn a year previously.
Thames Water has been on the brink of bankruptcy since March 2024, when its original investors - mainly overseas investment funds - refused to put extra equity into the business, calling it "uninvestable". It faced stringent criticism for paying out dividends and building up vast levels of debts rather than investing in its aging infrastructure, while its dire performance record includes multiple leaks and sewage discharges.
However, chief executive Chris Weston insisted that Thames Water was "a very a different business" today from what it was two years ago.
He continued: "While we have a lot more to achieve, the progress we have made in turning the company around has meant we are now performing better and are in a strong position to accelerate the delivery of the biggest upgrade of our infrastructure in 150 years.
"This upgrade will, over time, address asset resilience issues and translate into sustained improvements in the services we provide."
Thames Water invested 2.7bn in its water and wastewater networks over the year, a 20% rise year on year. But the utility - which supplies around 16m customers across London and the south east - acknowledged that the spike in revenues had not been enough to fund its investment programme, leading it to seek out new debt funding.
The company also confirmed it could survive for another year. But it warned there was "material uncertainty" about its ability to secure enough liquidity to see it through a successful recapitalisation.
The utility's senior creditors have proposed a 10bn rescue deal, under which they would take formal ownership, inject fresh equity and write off a chunk of the debt pile. But in return they want the regulator to reduce green investment requirements and sanctions and write off millions of pounds of outstanding fines. Ofwat is considering to review the scheme, but the government has already voiced concerns about the proposal, arguing that it does not do enough for either customers or the environment.
Weston told Reuters that the creditors were also keen to see "what the new government thinks before doing anything further". Andy Burnham, who is poised to replace outgoing prime minister Keir Starmer this month, has previously said he believes that Thames Water should be returned to public ownership.