Collapse is the most likely scenario and entirely for political reasons shareholders want a 40% rise in bills which OFWAT says is unreasonable which results in a stalemate which means nationalisation is the inevitable result as that means everyone pays to bail out Thames via taxes instead of water bill payers as no govt based in london wants the heat from that.
I dont think anything will happen quite yet. I think Ofwat will publish the five year determinations at the end of the year, it won't meet the financing levels Thames wants, and Thames will then likely appeal to the CMA for a redetermination which takes another year or so. The outcome then is anyone's guess.
It has, however, been asset-stripped and mortgaged by previous owners (RWE and Macquarrie), and shafted by a clueless and toothless regulator.
The Thames issue was mostly the result of a bad investor (Macquerie) and specific poor regulation 15 years ago which didn't stop what they were doing.
But as a wider point I think the problem at the regulator has been two fold. Firstly they've been so focussed on stopping bill rises that they have failed to allow the level of investment the industry wants, over quite a long time frame. Second, the service failures that have started to result from this action have led the regulator to tighten the belt on investors even more, rather than allowing more funding, and this is starting to squeeze the investors to a level where they aren't making comparable market returns. This has led to further underinvestment behaviour to make up the difference.
The regulator needs to allow more investment and higher but more stable returns, take away the ability to asset strip and force the sector into more improvement. This will need bills to go up. There is an argument already that water is too cheap, and that its low cost doesn't incentivise any customer side efficiency behaviours. This is compounded by a lack of metering so half teh country doesn't pay for what they use.
a lot of structural issues to fix here. But nevertheless, under a private ownership model, investors need to make a return to invest in this vision. Without that, no investment, no achieving of the long term goals of the sector which require billions in funding, and we have the stagnant too-ing and fro-ing we currently have between investors, regulators and the media.