The utility company that left Tunbridge Wells residents without running water for weeks risks a cash crunch that threatens its future.
South East Water has warned that without fresh financing in the coming months, it would lack the liquidity to meet its financial obligations “as they fall due”.
Discussions about additional funds “are at an advanced stage and are expected to conclude over summer 2026,” it said.
However, there is a “risk that funding will not be received”, which “may cast significant doubt on the ability of the group and company to continue as a going concern,” South East added.
The alert, buried in the company’s annual report, follows a disastrous few months for the company, which provides water to 2.3 million customers across Hampshire, Berkshire, Surrey, Sussex and Kent.
South East Water was fined £30m last week for a series of supply interruptions that left around 70,000 homes in Tunbridge Wells and the surrounding area without water.
It also comes at a time of intense scrutiny for the water industry following years of chronic underperformance despite above-inflation bill rises. Andy Burnham, the incoming Prime Minister, has reportedly made greater public control of Britain’s utilities one of his main priorities.
South East said that under a “base case” scenario, it anticipated “a need to secure new loan facilities” shortly after the financial year ends in July 2027.
In a “severe but plausible scenario” there could be a need to secure new lending before the end of the financial year, it said. Yet the company admitted its ability to raise new debt “is not wholly within our control”.
The hunt for new funds was triggered after it suffered a debt downgrade in May. The move to junk status by ratings agency Moody’s put the company in breach of its operating licence.
As a condition of its licence with regulator Ofwat, South East is required to hold at least two investment-grade credit ratings at all times. The downgrade left South East with just one.
The Telegraph understands that bosses have been forced to turn to some of Wall Street’s most aggressive hedge funds as it scrambles to raise around £100m in vital funding.
They are believed to include King Street, a $26bn (£20bn) New York investor that specialises in providing debt to financially stretched companies. King Street was among several debt houses that provided vital funds to Southern Water, another of the sector’s worst performers, in 2024 at a time when mainstream lending to struggling water suppliers was evaporating.
The political backlash against the water sector has intensified in recent days following a series of disclosures about high pay for bosses at Thames Water and Anglian Water.
In his maiden speech as Labour leader, Mr Burnham laid the blame for the cost of living crisis at the door of Margaret Thatcher and her sweeping privatisation programme of the 1980s. “The country surrendered control of the essentials, housing, water, energy, transport and left people exposed to higher costs,” during that period, he said.
Dave Hinton and Chris Train resigned as chief executive and chairman of South East Water respectively following a damning report from MPs into the supply failures that plunged Tunbridge Wells into chaos. MPs on the environment committee accused the utility of poor leadership, weak governance and a culture where nobody was held accountable.
The company did not communicate clearly with customers about the supply disruption and did not provide adequate bottled water supplies, regulator Ofwat found.
Ofwat said: “Customers had no tap water, were unable to shower or bathe and faced long delays when travelling to and queuing at bottled water stations. Some had to cancel work due to school closures and others had difficulty dealing with medical conditions.”
The fiasco had “caused real disruption and hardship for residents and businesses across many years, and supply interruptions of this scale have happened far too often,” it added.
A spokesman for South East Water said: “South East Water maintains adequate liquidity and a resilient underlying capital structure. In May 2025, our shareholders injected an additional £200m of equity capital into the company, bringing our key debt ratio to 67pc as of 31 March.”
The spokesman added: “Advanced negotiations with lenders regarding new loan facilities to fund the first stage of our ambitious infrastructure rollout are nearing completion and are expected to close this summer.”
King Street declined to comment.