Thames Water Outlook Changed by Moody’s on Tunnel Project Risks

Apr 16, 2014 1:27 pm ET

April 16 (Bloomberg) -- Thames Water Utilities Ltd., the largest water and sewer company in the U.K., had its outlook lowered to negative from stable on the Baa1 corporate family rating by Moody’s Investors Service due to its tunnel project.

“The outlook change reflects the risk that the company may not be able to exhibit sufficient headroom within its financial profile to absorb the risk, albeit limited,” posed by its involvement in the Thames Tideway Tunnel project, Moody’s said today in a statement from London.

Thames Water is planning a competitive tender to raise most of the money for its 4 billion-pound ($6.7 billion) super-sewer project that’s to run for 20 miles along the famed British waterway. On completion it will be the longest and deepest ever built in mainland Britain.

The outlook change follows Thames Water’s announcement “that it would launch a consent solicitation process to obtain senior lenders’ approval for certain technical amendments to its finance documentation to facilitate” the sewage interceptor tunnel, Moody’s said.

“Even though the development of the TTT project through a specified infrastructure provider will ring-fence Thames Water from the main construction risk, a credit positive, Moody’s still believes that the company is exposed to reputational and financial challenges that other companies in the sector do not face,” it said.

The closely held company, with 14 million customers in the London area, is a subsidiary of Thames Water Ltd., acquired in 2006 by Kemble Water Ltd., a group of funds and institutions led by Macquarie’s European Infrastructure Funds.

At present at least 30 million tons of excrement and waste spill each year into the waterway.