Annual Financial Report

Thames Water Utilities Limited

15 July 2025

Thames Water Utilities Limited Annual Results for the year to 31 March 2025

Chris Weston, Chief Executive Officer of Thames Water, said:

"Thames Water has made good progress in operational performance, despite the ongoing challenging financial situation.

"The new organisation structure, focused on our infrastructure, brings clearer accountability and has helped our transformation continue to gain momentum. As a result, we have made sustained progress overall against our six critical operational priorities in 2024/25. However, that progress is not demonstrated in our disappointing pollutions outturn. We also delivered best in-AMP performance for seven of Ofwat's 12 key 'Water Company Performance Report' measures.

"Pollutions were adversely impacted by rainfall and high groundwater levels, but we have made progress in terms of addressing many of the underlying causes of our poor performance, including being more proactive in sewer cleaning. While it is disappointing this work was not reflected in performance improvement in the year, we are confident that it will translate into future environmental performance.

"Whilst the external environment is challenging for our colleagues, pleasingly colleague engagement improved, and I am grateful for their continued hard work and support.

"We invested a record £8.5 billion in infrastructure between 2020 and 2025. We enter the new regulatory period of 2025-2030 in a better place than we entered the 2020-25 period with leakage at its lowest ever level, down by 13.2% since 2020. A defining moment last year was the connection of the £4.5 billion Thames Tideway Tunnel to our London network supporting the reduction in sewage entering the tidal River Thames by 95%.

"We recognise that our current gearing is too high and, to address this, we are progressing with our Senior Creditors' plan to recapitalise the business which will see us return to a more stable financial foundation. This will come with a requirement to re-set the regulatory landscape and acknowledge it will take at least a decade to turn Thames around."

Operational performance

· We have delivered our best in-AMP performance for Leakage, Supply Interruptions, Complaints and Lost-time Injuries, and Water Quality (CRI) was the second-best result in AMP, sustaining the positive progress made in FY24 and only narrowly (0.04) missing the regulatory deadband.

· Delivered best in-AMP performance for seven of Ofwat's 12 key 'Water Company Performance Report' measures (Supply Interruptions, Leakage, Mains Repairs, Sewer Collapses, Internal Sewer Flooding, Per Capita Consumption, and Priority Services Register).

· Significant rainfall and high groundwater levels led to 34.3% increase in Pollutions (2024: 470; 2023: 350) but progress on addressing underlying causes

· ODI penalties increased to £88.2m from £56.9 million as our regulatory targets became tougher.

Sustainability highlights

· £4.5 billion Thames Tideway Tunnel connected to the London network including existing Lee Tunnel, providing protection for the tidal River Thames

· 6,736 megalitres of sewage diverted from the River Thames into the London Tideway Tunnel system between 24 August 2024 and 22 March 2025

· 408,670 households on social tariff, an increase of 13% (FY24: 358,357)

Financial performance

· Record capital investment of £2,225 million.

· Underlying revenue increased by more than 8% to £2,603 million and Underlying EBITDA increased by over 10% to £1,335 million.

· Underlying operating profit increased by £112 million to £556 million (underlying EBITDA less £779 million of asset depreciation and amortisation plus a small reversal of asset impairment).

· There was an underlying loss before tax of £6 million, down from a profit of £204 million the previous year (underlying operating profit less underlying net finance expense of £414 million and underlying net losses on financial instruments of £148 million).

· Total loss before tax was £1,647 million, down from a £157 million profit before tax in 2023/24 (underlying loss before tax less exceptional costs totalling £1,776 million partially offset by a £135 million profit related to billing on behalf of Bazalgette Tunnel Limited). The exceptional costs are broken down as follows:

o £1,271 million expected credit loss provision recognised against the intercompany loan receivable from TWUL's immediate parent company Thames Water Utilities Holdings Limited. This balance is now fully provided for as it is not deemed recoverable.

o £33 million on turnaround and transformation expenditure.

o £122 million of provisions raised for fines as a result of Ofwat investigations.

o £151 million of restructuring costs.

o £198 million of consent fees related to our restructuring plan.

With the exception of turnaround expenditure, which enables more efficient and improved services for customers, the exceptional costs will not be borne by customers as reported within our Annual Performance Report.

Financial resilience

· AMP8 Final Determination (FD) allowance of £20.5 billion does not appropriately support the investment required nor the turnaround of the company and we referred to the CMA which is currently on hold.

· Creditors continue to support the business liquidity requirements through a super senior facility.

· Liquidity of £1.7 billion as at 31 March 2025, comprising cash of £0.2 billion and £1.5 billion super senior loan facility.

· Equity raise process continues.

Key financials

1 Our financial statements include the amounts billed in relation to the construction of the Thames Tideway Tunnel, which are passed to Bazalgette Tunnel Limited ("BTL"), the independent company responsible for the construction of the tunnel. As this money is not retained by us, we exclude it from our underlying results. Further information about the BTL arrangement can be found below.

2 Table includes rounding differences.

3 The investment in assets includes £0.1 billion (2024: £0.1 billion) assets which have been constructed under self-lay by third parties at nil cost

4 Liquidity includes £1.5 billion super senior facility which was undrawn at 31 March 2025 and requires creditor waivers for drawings whilst the court-sanctioned restructuring plan remains subject to appeal.

For further information

Investor enquiries

Fred Maroudas - Director of Corporate Finance [email protected]

Media enquiries

Suvra Jans - Head of Media Relations

07747 640 810 Jason Collie - Senior Media Relations Manager

07747 640703 [email protected]

Chief Executive Officer StatementChris Weston

A dedicated team

I want to start by thanking our incredible teams for their commitment and delivery over the last year; they have done a great job in often challenging circumstances. The financial resilience issues we face continue to dominate the headlines. Despite this, the team has maintained focus on the delivery of our core priorities and services, and I want to thank each and every one of them for their dedication and resilience. In this context, the Executive Team and I were really encouraged to see our engagement score go up by two percentage points to 71% since our last survey. We've continued to deliver over 2.5 billion litres of clean water and treated 4.7 billion litres of wastewater every day of the year - the scale of what we do should not be understated.

Operational progress

As a result of our new operational structure, we made sustained progress overall against our six critical operational priorities. We also delivered best in-AMP performance for seven of Ofwat's 12 key 'Water Company Performance Report' measures. 

I've been clear since I started that health and safety is my number one priority, and I'm really pleased we've reduced lost-time injuries by 15% during the year. Everyone must go home safe and well every single day. Health and safety improvements will always come first.

We reduced supply interruptions by over 40% and reduced complaints by 17%, and leakage was at its lowest-ever level, with a small reduction year on year. While our compliance risk index, which measures the potential risk to water quality, was up marginally, our water quality remains high, passing 99.97% of over 400,000 tests in 2024. Reducing pollutions, however, continues to be a significant challenge for us, increasing to 470 from 350 pollutions in the last calendar year. Groundwater levels remained high and rainfall was above average, albeit not at the severity we saw in the previous year. Prolonged wet weather meant further rain had nowhere to go other than to inundate our ageing and fragile sewer network. Reducing pollutions and discharges is something we're really focused on, and we plan to invest record amounts in our waste network during the next five years.

The last five years

Last year marked the final year of a five-year regulatory period, which was bookended by a global pandemic and challenges to our financial resilience. Despite the intense pressure the business has been under, we must also recognise what we've achieved in the last five years.

We've invested a record £8.5 billion in our infrastructure since 2020, after a slower-than-planned start to our major projects programme due to lockdown and restrictions on construction work. We have invested huge amounts in our water network since 2020, including replacing over 200 km of water mains, which helped us bring leakage down by 13.2% over five years, although Ofwat had set us the target of a 20.5% reduction. We also invested in customer service, digital innovations and treatment works upgrades. Our financial resilience issues have been front and centre and have dominated the headlines. However, behind the scenes, one of the defining moments of the last year was the connection of the newly constructed £4.5 billion Thames Tideway Tunnel to our London network, including our existing Lee Tunnel. Together with the upgrades we've made to major works in London, these two super sewers will reduce the volume of sewage entering the tidal River Thames by 95% once fully operational - that's millions of tonnes of sewage that are now being diverted from the river. And the next five years will see us continuing to invest in London rivers and making record investments across the Thames Valley and Home Counties.

Our transformation

During FY25, our transformation continued to gain momentum. The reorganisation of the business to fit with the lifecycle of our assets has helped break down silos, with everyone responsible for building, planning and operating our infrastructure now brought together in one team, led by our recently appointed Chief Operating Officer. To get things right for our customers, we need to focus on fixing our infrastructure. These new ways of working will take time to embed fully, but we're already seeing performance progress as a result. As we move into the next regulatory period, we will deliver the next stage of our transformation programme, investing extensively in our assets, performance and people.

Help for customers

To be able to invest in our network at the rate we need to in order to deliver for our customers and the environment, our bills have had to go up. Typical household bills have gone up by 40% in 2025-26. We know that's been difficult for many of our customers, and we've been continuing to increase our support for those who need it. We're now helping over 400,000 customers with their bills.

PR24 and Determination Process

The Price Review 24 was incredibly challenging, and we received a Final Determination that was neither financeable nor investable. We're talking to our regulator, Ofwat, and our creditors about our Final Determination, in the hope that we can find a solution that removes the need for our referral to the Competition and Markets Authority, so we can keep focused on the delivery of our transformation for customers and the environment.

Recapitalising the business

We have faced an increasingly challenging financial position during this year, and have focused on putting Thames Water on a more stable financial and operational path as we head into the next regulatory period. However, to be able to deliver for our customers, there needs to be a full reset of the regulatory landscape, based on the reality of where we are. And I look forward to seeing the recommendations made by Sir Jon Cunliffe in the Independent Water Commission report.

The recapitalisation process remains ongoing, but we're in an improved position compared to six months ago, and our creditors have been supportive throughout the process. Although we face resilience challenges, we've returned solid underlying growth in both revenue and underlying EBITDA.

We've continued to engage with our stakeholders as we move forward with our stabilisation and the transformation of the business. There have been some difficult conversations, but many have been constructive, and we remain committed to being open and transparent about what we're doing.

Preparing for the future

While there's much focus on the near-term challenges, it's also a time of opportunity and looking ahead to the future. We're embarking on our biggest-ever investment programme, which will deliver increased resilience for customers and improvements in environmental performance.

Water is fundamental to growth in the UK, and we have a huge responsibility to be ready for what the future will bring - 2 million more people are expected to move into our region by 2050, in addition to the 1 million more residents we have now compared to a decade ago, and new water infrastructure is needed for new housing. Water is also critical to the UK being able to remain at the forefront of new technology such as AI - every data centre we serve consumes the equivalent of thousands of homes' worth of water every day.

Without action, we're expecting a significant shortfall in the amount of water, as populations grow and climate change continues to get worse. The need to introduce hosepipe restrictions this summer makes this evident, which is why we're thinking ahead. We have seen huge success in the delivery of major critical infrastructure like the Thames Tideway Tunnel project, which is now fully connected and undergoing testing. Following this achievement, we're adopting an innovative model for the construction of our major new reservoir near Abingdon, which is planned to be completed by 2040, and this will secure water supplies for London and the South East for many years to come.

As we head into the new financial year, I'm pleased to see that we are already making good progress in all six of our operational priorities, including pollutions. No doubt, this year will be equally busy, however, we're optimistic about the future. Teams will continue to be heavily involved in the delivery of our recapitalisation, meanwhile, our primary focus is on delivering our essential services and building a better future for this business, one built on sustainability, service and accountability.

Chief Financial Officer StatementSteve Buck

I joined Thames Water in April 2025, having previously served at the company between 2002-2007. A lot has changed in that time and, in my first months, I have been getting back up to speed at this pivotal time for the business. What has not changed is the dedication and passion our people have for serving our customers and the environment and driving improvement every day.

My focus has been, and will continue to be, on establishing a more stable financial foundation through delivering the turnaround and recapitalisation of the business. During the year to 31 March 2025, we have faced an increasingly challenging financial position. Gearing reached 84.4%, cash available fell to £235 million and our credit ratings at both the Corporate Family level and for our Class A debt were lowered to sub-investment grade.

Nevertheless, our underlying company performance has strengthened: we are increasingly in control of our operational expenditures, and we have been successful in accelerating the pace of capital expenditure. The year also saw strong underlying growth in both revenues and EBITDA, as a result of an increased customer base, higher consumption and the annual tariff increase.

We are delivering a large increase in investment throughout the five year period covered by AMP8 (1 April 2025 to 31 March 2030). Over this period, our business plan means we will be investing nearly double what we have in the previous five year period which reflects our extensive environmental obligations, our ageing infrastructure, and the need to protect the environment in the face of more challenging climate conditions. To deliver this sharp increase in capital expenditure efficiently and effectively, we need to secure the financing necessary to fund it.

 We have concluded that the balance of risks and reward in our Final Determination (FD) by Ofwat in December 2024 did not provide what was needed for an investible and financeable business plan during the 2025-2030 period. This is unlikely to change without a re-set of the regulatory landscape. We have taken steps to secure the required financing in the near term to maintain our status as a going concern and to give us the time to secure a sustainable longer-term outcome for our finances. We have taken the decision to refer the Ofwat determination to the CMA. We have agreed with Ofwat to pause the referral for 18 week to 21 July 2025 to give time for discussions between the Company, the Ad-Hoc Group of our Class A creditors (the "Class A AHG"), Ofwat and other public sector stakeholders which, if successful, could provide the basis for a holistic recapitalisation of the Company. The timetable for the process (including the CMA deferral) remains under review.

Our creditors continue to support our efforts to recapitalise with a view to securing court approval for a second restructuring plan (RP2) to put the Company on a sustainable long-term financial footing. An equity raise process commenced in summer 2024 and this has resulted in the Company progressing a proposal by the Class A AHG. It is this alternative proposal that is currently being discussed with Ofwat.

In the meantime, we continue to deliver our transformation plan, seeking to scale up our capital delivery capacity and improve the performance of our assets and drive continuous improvement. Core to our plan is recapitalising the business and delivering within our means. This is not done without risk and I would draw your attention to both the Principal Risks section which describes the challenges still facing the Company, and the basis of preparation disclosure in the financial statements and the long term viability statement.

Income Statement

Revenue

Underlying revenue of £2,603 million represents an increase of £201 million compared to 2023/24. This increase was driven primarily by rises in our charges for water and wastewater services per our allowed regulated revenue. Our 2024/25 allowed revenue reflects CPIH inflation rate of 4.2%, regulator-approved "K" factors of -4.9% for water and +4.1% for wastewater. These increases were partially offset by historic wholesale and retail Outcome Delivery Incentive (ODI) penalties which have a 2 year lag flowing through into revenue.

EBITDA

Underlying EBITDA of £1,335 million represents an increase of £127 million compared to 2023/24. This was driven by the increases in revenue, offset by a £72 million (6%) increase in net operating expenses.

Increases in net operating expenses are due to higher insurance costs (£30 million), third party supplier costs (£23 million), IT costs (£17 million), Rates (£15 million) resulting from a new Valuation Office listing period and higher employment costs (£6 million). This was partially offset by a reduction in power costs (£19 million) resulting from lower power prices over broadly similar usage across the year.

Bad debt remains a key focus for management, with charges decreasing by £2 million to £86 million, equivalent to 3.8% of total household appointed revenue (FY24: 4.3%). Of this, £42 million related to current year bills, which is accounted for as a deduction to revenue.

We continue to support our financially vulnerable customers who cannot afford to pay their bills in full through the use of social tariffs and other proactive support, with £116 million of customer assistance provided in this financial year.

Other Operating Income of £150 million, increased by £1 million compared to 2023/24. Income within the period included £34 million associated with the relocation and construction of a new Sewage Treatment Works in Guildford.

Exceptional operating costs of £220 million, represent an increase of £176 million compared to 2023/24. Exceptional costs in the year relate to the recognition of £122 million in relation to provisions raised for fines as a result of Ofwat investigations, £34 million increase in fees for advisors assisting in the equity raise and balance sheet restructuring process, and £20 million increase in turnaround and transformation expenditure.

Exceptional costs partially offset by increases in BTL revenue of £19 million, resulted in a total EBITDA of £1,250 million a decrease of £31 million compared to 2023/24.

Operating profit

Underlying operating profit of £556 million, increased by £112 million compared to 2023/24. This was driven by growth in underlying EBITDA which was partially offset by a £15 million increase in depreciation, amortisation and movements in asset impairment.

Total operating profit of £471 million, decreased £46 million compared to 2023/24, reflecting the impact of exceptional costs and BTL in the period, discussed in the previous section. The Thames Tideway Tunnel is not yet fully operational, however on handover our accounts will reflect depreciation on this right of use asset over its 120 useful economic life.

Loss/Profit before tax

Underlying loss before tax of £6 million, decreased from a £204 million profit before tax in 2023/24. This £210 million movement was driven by losses on financial instruments offset by operating profit and financing costs.

Total loss before tax of £1,647 million, decreased from a £157 million profit before tax in 2023/24. Exceptional items include £210 million of operational costs (explained under the EBITDA section), the recognition of £1,271 million (2023/24: £119 million) of expected credit loss provision being recognised against the intercompany loan receivable from TWUL's immediate parent company Thames Water Utilities Holdings Limited (fully provided for and deemed to not be recoverable) and £285 million of exceptional financing costs including consent fees related to our restructuring plan.

Tax

In the reported financial year Thames Water paid £206 million to HMRC in business rates, PAYE, National Insurance Contributions, and other taxes. The corporation tax charge is based upon the standard rate of corporation tax in the UK of 25% applied to profits earned during the 12 months to 31 March 2025. The Group is not currently in a cash tax paying position with HMRC (although it does pay or receive amounts for group relief), primarily due to capital allowances on capital expenditure, tax deductions for borrowing costs and group relief which has arisen on interest expenses in holding companies.

 Of the £206 million, £196 million was incurred directly, mostly through business rates and employer National Insurance Contributions, and £10 million was incurred through indirect taxes such as the Climate Change Levy, Landfill Tax and Insurance Premium Tax.

The underlying tax credit of £19 million comprised a current tax charge of £72 million and a deferred tax credit of £91 million. The total tax credit of £133 million reflects a £29 million tax credit on BTL, which is a reversal of the 2023/24 BTL charge due to a change in position regarding not paying for group relief by the Company and TWUF.

Profit/Loss after tax

Underlying profit after tax was £13 million, a decrease from a £140 million profit after tax in 2023/24.

Total loss after tax was £1,514 million, a decrease from £75 million of profit after tax in 2023/24.

Capital Investment

Capital investment of £2,225 million, increased by £141 million (7%) compared to 2023/24, this includes £0.1 billion assets which have been constructed under self-lay by third parties at nil cost. This was driven by work to improve resilience in our network, mitigate climate change and population growth.

The key projects and programmes delivered during the year include the following:

· £791 million invested through our in-house Capital Delivery vehicle, including: £92 million on water distribution mains replacement and rehabilitation in London and the Thames Valley;

· £70 million on the installation of new water trunk mains;

· £30 million on inspection and refurbishment of London's raw water transfer tunnels and Thames Water ring main and £8 million pressure on management activity

· £430 million improving asset resilience through refurbishment and replacement across our waste treatment sites and waste infrastructure asset base

· £229 million invested on our water network to reduce leakage and improve our trunk main network.

· £170 million on upgrading our major sewage treatment works at Beckton, Modgen, Greenwich, Crossness and other sites.

· £168 million on the work on Thames Tideway Tunnel and connecting our network to the tunnel, including £21 million on the Beckton inlet works.

· £100 million invested to make progress on our Strategic Resourcing Options, with Abingdon Reservoir activities spending £68 million to ensure continued focus in securing stable and safe supply of water for generations

· £73 million on our metering programme

Pensions

As of 31 March 2025, the total net IAS19 accounting pension deficit for the Group's defined benefit schemes was £86 million.

The Group's two independently administered defined benefit schemes, the Thames Water Pension Scheme (TWPS) and the Thames Water Mirror Image Pension Scheme (TWMIPS), saw a combined deficit reduction of £33 million. This improvement was driven by actuarial gains and £22 million of company contributions. The Group continues to make actuarially agreed regular contributions for active employees and deficit repair contributions as agreed as part of the triennial valuation recovery plan aimed at reducing the deficit to zero by 2029.

Both schemes will be revalued as at 31 March 2025 as part of the triennial valuation currently underway.

Cash flow statement

1 Cash capex is net of proceeds from sale of sale of property, plant and equipment

2 Gross cash and cash equivalents excluding bank overdraft

Underlying operating cash flow increased by £134 million to £1,270 million, driven by an increase in working capital and offset by a decrease in operating profit.

Net interest paid of £213 million for the year represents a £70 million year on year increase, primarily driven by higher net debt and increased borrowing costs. Net cash interest paid for senior covenant calculation purposes was £414 million, a £102 million increase year-on-year (although the financial covenant is currently suspended).

There was an underlying net cash outflow of £939 million in the year and a total net cash outflow of £919 million. Total gross cash and cash equivalents held at 31 March 2025 was £306 million.

The prior year cash flow statement has been restated to due to adjustments identified related to the presentation of (i) adoption of nil cost assets and (ii) net settlement of dividends declared, and tax losses sold.

Liquidity extension

In February 2025, the High Court sanctioned our initial, interim restructuring plan (RP1) which included £3.0 billion in new super senior funding to extend out liquidity runway. This consists of an initial £1.5 billion committed facility and a £1.5 billion uncommitted accordion facility. Both the initial £1.5 billion facility and the accordion facility (which comprises two tranches of £750 million each) include conditions precedent which are currently unsatisfied. Whilst the conditions precedent remain unsatisfied, the £1.5 billion super senior issuer funding will continue to be drawn in tranches sized in line with TWUL's liquidity needs. This process will probably continue until the Appeal Period ends and a lock-up agreement is concluded, either later in 2025 or in 2026. It is not intended that the further £1.5 billion accordion, which is also expected to be subject to drawdown in tranches, is accessed until sufficient undrawn amounts under the initial £1.5 billion are no longer available.

Creditors have remained supportive and have on three occasions waived the conditions precedent, permitting drawings of £350 million in March 2025 and £365 million in April 2025. The Group is expected to draw a further £157 million at the end of July 2025, which will be made available to TWUL in two tranches falling in July and August 2025. As at 30 June 2025, TWUL had available cash and cash equivalents of £424 million.

Gearing and interest cover

Net debt increased to £17,725 million, with senior gearing at 84.4%. The Senior Post Maintenance Interest Cover Ratio (PMICR) was 1.09x, below the minimum Trigger Event covenant level of 1.1x, although the requirement to comply with financial covenants is currently suspended.

Credit ratings

The Company is presently rated sub-investment grade by both Moody's and S&P. Returning to an investment grade credit rating following a holistic recapitalisation of its balance sheet is a crucial objective for Thames Water, both to meet its licence conditions and to raise debt to finance its investment programme.

The Company has been subject to multiple credit ratings downgrades over the year. In April 2024, both Moody's and S&P downgraded the Company's credit ratings following the decision of the Kemble shareholders not to invest £500 million of new equity. The downgrades resulted in a cash lock-up under the Company's licence, which restricts payments, including dividends, to associated companies, without the prior approval of Ofwat.

In July 2024, both Moody's and S&P further downgraded the Company's credit ratings to sub-investment grade, based on worsening liquidity and the likely impact of Ofwat's Final Determination for AMP8.This caused a breach of credit ratings conditions under the Company's licence. Ofwat has accepted undertakings by the Company to appoint both an independent monitor, L.E.K., and two new independent non-executive directors. These commitments will remain in place until the Group regains two investment grade credit ratings.

Following further downgrades, our credit ratings are currently as follows:

· Moody's: Corporate Family Rating (CFR) at Caa3 (stable outlook), Class A at Caa3 (stable outlook), and Class B at C (stable outlook)

· S&P: Class A at CCC (negative outlook) and Class B at CC (negative outlook)

Cost of Interest

The Group uses derivative financial instruments where appropriate to manage the risk of fluctuations in interest rates. As of 31 March 2025, interest rates for 40% of our gross debt were fixed, 48% were index-linked to RPI, and 12% were floating on a post-swap basis. Overall, the Group's effective cost of interest, including accretion on index-linked debt, was 5%; the effective cash cost of interest was 3%.

During the year, £132 million of accretion was paid on maturing index-linked swaps, and £143 million of accretion was paid on index-linked swaps which have not yet matured.

The average debt maturity at the end of the year was 13 years.

Going concern

The Directors believe that it is reasonable to assume that the Group and Company will have adequate resources, for a period of 12 months from the date of approval of these financial statements, to continue operations and discharge their obligations as they fall due.

However, the Directors believe there exists a material uncertainty as to whether the Group and the Company will be able to deliver a recapitalisation transaction by way of a court approved restructuring process successfully, either within the Assessment Period or at all. If it fails to do so, the Company would need to consider all options available to it at the time, but a possible consequence would be a special administration of the Company under the Water Industry Act 1991. The elements which will be key to the success of a recapitalisation transaction are each subject to uncertainties which are outside of the Group and Company's control and which could occur in the very near term. For further details refer to the basis of preparation disclosure in the financial statements.

Dividends

No dividends were paid to shareholders in 2024/25.Dividends are not currently permitted to be paid due to the licence and WBS cash lock-ups resulting from credit rating downgrades below investment grade.

Regulatory Investigations

Two Ofwat investigations were concluded after the year end.

Dividends

TWUL declared and settled internal dividends of £195 million in 2023/24. Condition P30 of our Instrument of Appointment ('Licence') requires, amongst other things, that dividends declared or paid take account of service delivery for customers and the environment over time, including performance levels, and other obligations. On 28 May 2025 Ofwat announced it had concluded its investigation. Ofwat found that TWUL was in contravention of Condition P30 and issued a penalty of £18.2 million. Ofwat concluded that it was not necessary to also issue an Enforcement Order. This fine has been provided for within the 2024/25 results and accounted for as an exceptional cost in operating expenses.

We cooperated fully with Ofwat's enquiries and provided extensive evidence that the Board took account of its licence obligations, including the Company's performance and service delivery metrics, when deciding whether to declare and settle a dividend. In taking a different view, Ofwat's investigation introduced unwelcome uncertainty around the role of dividends that are necessary to finance necessary infrastructure investments, particularly for companies in turnaround. We continue to make representations to Ofwat that it should address these uncertainties urgently.

Wastewater

In 2021 Ofwat and the Environment Agency began an investigation into wastewater, initially focussed on 5 water and sewage companies in England and Wales, but subsequently expanded to include all Water and Sewerage companies. On 28 May 2025, Ofwat concluded its investigation into TWUL and issued the company with a Penalty notice for £104.5 million having found TWUL in breach of:

· Regulation 4(4), 4(2) and Schedule 2 of the Urban Wastewater Treatment Regulations 1994 ('UWWTR') - ensuring wastewater treatment works and network collecting systems are constructed, operated and maintained so that spills only occur in exceptional or unforeseeable cases.

· Section 94 of the Water Industry Act 1991 ('WIA91') - Providing effectual drainage of local areas and effectually dealing with the contents of sewers and

· Condition P of our Instrument of Appointment ('Licence') - ensuring as a company that it is run effectively in compliance with its statutory duties.

Although we disagreed with Ofwat's findings of breach we had sought to agree comprehensive and binding undertakings with Ofwat in lieu of a penalty, and it was disappointing that this was not ultimately possible. On 19 June 2025 the government announced that penalties arising from this investigation would be ringfenced for local environmental projects. Ofwat's decision also requires the company to put in place a number of remediation actions (similar to those required of other companies it has found in breach), and an obligation to report on progress to Ofwat, and publish progress on our website.

The Environment Agency continues its parallel investigation into WASCs in respect of compliance with environmental permits as part of their nationwide Operation Standard investigation.

Given the ongoing financial restructuring we are engaging with Ofwat on an appropriate timeframe to pay both penalties.

This notice is given by:

THAMES WATER UTILITIES LIMITED

15 July 2025

LEI: 213800JKM5UQHFJOTZ25