SUPPLEMENTARY PROSPECTUS DATED 3 DECEMBER 2008 THAMES WATER UTILITIES CAYMAN FINANCE LIMITED (incorporated with limited liability in the Cayman Islands with registered number MC-187772) 10,000,000,000 Multicurrency programme for the issuance of Guaranteed Wrapped Bonds unconditionally and irrevocably guaranteed as to scheduled payments of principal and interest pursuant to financial guarantees issued by a Relevant Financial Guarantor and Guaranteed Unwrapped Bonds financing Thames Water Utilities Limited (incorporated in England and Wales with limited liability with registered number 2366661) This Supplement (the Supplement ) to the Prospectus (the Prospectus ) dated 25 July 2008, which comprises a base prospectus, constitutes a supplementary prospectus for the purposes of Section 87G of the Financial Services and Markets Act 2000 (the FSMA ) and is prepared in connection with the multicurrency programme for the issuance of up to 10,000,000,000 Guaranteed Wrapped Bonds and Guaranteed Unwrapped Bonds (the Programme ). The payment of all amounts owing in respect of the bonds (the Bonds ) will be unconditionally and irrevocably guaranteed by Thames Water Utilities Limited ( TWUL ), Thames Water Utilities Holdings Limited ( TWH ), Thames Water Utilities Cayman Finance Holdings Limited ( TWUCFH ) and Thames Water Utilities Finance Limited ( TWUF ) as described herein. TWUL, TWUF, TWUCFH, the Issuer and TWH are together referred to herein as the Obligors. Terms defined in the Prospectus have the same meaning when used in this Supplement. Each of the Issuer and the other Obligors accepts responsibility for the information contained in this Supplement. To the best of the knowledge of each of the Issuer and the other Obligors (having taken all reasonable care to ensure that such is the case) the information contained in this Supplement is in accordance with the facts and does not omit anything likely to affect the import of such information. This Supplement is supplemental to, and should be read in conjunction with, the Prospectus. Amendment to details of the Auditors of the Obligors On 1 October 2008, each Obligor replaced PricewaterhouseCoopers LLP with KPMG Audit PLC as Auditors under the Programme. By virtue of this Supplement, any reference to PricewaterhouseCoopers LLP contained in the Prospectus is hereby deleted and replaced with KPMG Audit PLC.
By virtue of this Supplement, the wording Greyfriars Road, Reading, Berkshire RG1 1JG contained in the paragraph entitled Auditors on pages 187 and 246 of the Prospectus is hereby deleted and replaced with Canary Wharf (38 th Floor), 1 Canada Square, London E14 5AG. By virtue of this Supplement, the wording The statutory audited accounts of TWUL and TWUF have been prepared in accordance with generally accepted auditing standards in the United Kingdom, in each case for the fifteen months ended 31 March 2007 and the year ended 31 March 2008, and in each case the Auditors have given unmodified reports which contained no statement under section 237(2) or (3) of the Companies Act 1985. These audited accounts have been delivered to the Registrar of Companies. The statutory audited accounts of TWH have been prepared in accordance with generally accepted auditing standards in the United Kingdom, for the period from its date of incorporation to 31 March 2008, and the Auditors have given unmodified reports which contained no statement under section 237(2) or (3) of the Companies Act 1985. The audited accounts of the Issuer and TWUCFH have been prepared in accordance with generally accepted auditing standards in the United Kingdom, in each case for the period from their respective dates of incorporation to 31 March 2008 is hereby deleted and replaced with the following wording: The statutory audited accounts of TWUL and TWUF have been prepared in accordance with generally accepted auditing standards in the United Kingdom, in each case for the fifteen months ended 31 March 2007 and the year ended 31 March 2008, and in each case PricewaterhouseCoopers LLP (as former auditors of TWUL and TWUF) has given unmodified reports which contained no statement under section 237(2) or (3) of the Companies Act 1985. These audited accounts have been delivered to the Registrar of Companies. The statutory audited accounts of TWH have been prepared in accordance with generally accepted auditing standards in the United Kingdom, for the period from its date of incorporation to 31 March 2008, and PricewaterhouseCoopers LLP (as former auditors of TWH) has given unmodified reports which contained no statement under section 237(2) or (3) of the Companies Act 1985. The audited accounts of the Issuer and TWUCFH have been prepared by PricewaterhouseCoopers LLP (as former auditors of the Issuer and TWUCFH) in accordance with generally accepted auditing standards in the United Kingdom, in each case for the period from their respective dates of incorporation to 31 March 2008. The Cave interim report and 2008 Pre-Budget Report On 18 November 2008, the Cave Review published an interim report for consultation. The recommendations set out in the interim report were largely accepted by the Government in the 2008 Pre-Budget Report presented by the Chancellor of the Exchequer on 24 November 2008. By virtue of this Supplement, the wording It is expected that a final report of the review will be published in Spring 2009 contained in the paragraph entitled Competition in the water industry on page 49 of the Prospectus is hereby deleted and replaced with the following wording: On 18 November 2008 Professor Cave published an interim report for consultation which set out his preliminary recommendations and other areas that need to be further analysed. Those recommendations include the introduction of competition for large non-household users as a first step (by lowering the non-household users threshold to five megalitres first and, on the introduction of a suitable switching mechanism and accompanying changes, possibly in 2012, further reducing this threshold to one megalitre), retail legal separation, a reform of retail access prices, a reform of the abstraction licence/discharge consent regimes and possible reforms to the upstream markets with a view to further consideration 2
of the potential to introduce competition. The deadline for submitting responses to the interim report is 9 January 2009 and it is expected that a final report of the review will be published in Spring 2009. On 24 November 2008, the Chancellor of the Exchequer presented the 2008 Pre-Budget Report. The Government has largely accepted the recommendations set out in Professor Cave's interim report and announced a process for consulting on possible legislation (in line with those recommendations) to extend and enhance retail competition in the water markets in England for large non-household users. By virtue of this Supplement, the wording The final report, which will make recommendations to the government, is likely to be published in Spring 2009 contained in the paragraph entitled Competition in the Water Industry on page 84 of the Prospectus is hereby deleted and replaced with the following wording: On 18 November 2008 the Cave Review published an interim report for consultation. The final report, which will make recommendations to the government, is likely to be published in Spring 2009. On 24 November 2008, the Chancellor of the Exchequer presented the 2008 Pre-Budget Report. The Government has largely accepted the recommendations set out in Professor Cave's interim report and has announced a process for consulting on possible legislation (in line with the recommendations in the Cave interim report) to extend and enhance retail competition in the water markets in England for large non-household users. By virtue of this Supplement, the wording The Government has announced its intention to consult on a Water and Floods bill in the Spring of 2009. DEFRA has stated that the bill will include "any changes that may be required to the competition regime as a result of recommendations from the current independent review " contained in the paragraph entitled Competition in the Water Industry on page 85 of the Prospectus is hereby deleted and replaced with the following wording: The Cave Review interim report sets out preliminary findings and recommendations to Government. In summary, the Cave Review is in favour of a phased approach for the introduction of competition, starting with customer groups and types of activity where the risk-return ratio is most favourable (non-household customers) and then introducing further competition at appropriate break points on the basis of advice from Ofwat and other parties. The report focuses on retail competition, reforms to the abstraction licence and discharge consent regimes and upstream competition. The recommendations include: (i) Retail competition: the Review recommends the reduction of the threshold for competition applicable with respect to non-household users to five megalitres per year as soon as practicable (the 2008 Pre-Budget Report indicates that DEFRA will consult on the implementation of this early in 2009) and to one megalitre by 2012. In around 2012 competition should be extended to retail sewerage services in order to give these users choice of both their water supplier and wastewater supplier. The Review considers that the Government could then give consideration to extending competition to the remaining non-household and household users after 2014 on the basis of advice from Ofwat and other parties and with the hindsight of experience gained from retail competition for large non-household users. The Review further recommends the following measures for retail competition: -- Price cap: in order to protect customers from the risk of higher prices or decline in services, all retailers should offer a default retail tariff and minimum levels of service set by Ofwat, initially at the current level of the 3
retail price cap. Small non-household and household users should further be protected by a statutory code on mis-selling; -- Vertical separation: retail divisions of water companies should be made legally separate from their network business. This would be implemented around 2012; -- Single regional wholesaler: all retailers would buy services from a single regional wholesaler the present incumbent who could sell at an average price to all retailers; -- Wholesale price for water and wastewater services: this should be determined by Ofwat at a level that allows the upstream operator to cover its efficient network, treatment and disposal costs, including an appropriate return on capital. Accordingly, it would be based on full economic costs rather than on the costs principle which would be removed from primary legislation. This would be implemented around 2012; -- Introduction of a new self-supply retail permit so that customers fulfilling certain requirements, in particular public health considerations, could buy direct from the wholesaler; -- Replacement of the current water supply licence and undertaker appointment frameworks with a system of retail permits. In the interim period, in order to encourage competition, Ofwat should consider the need for additional changes to the water supply licence and inset appointment regime to make them more efficient and effective. The review recommends that Ofwat publishes revised inset guidance as soon as practicable; -- Replacement of the current WSL system of regionally negotiated access agreements with national market and operational codes binding for all market participants across England and Wales; -- Reform of the merger regime for retail companies once retail competition has been introduced (e.g. by removing the need for an automatic reference to the Competition Commission); and -- Introduction of a statutory duty on Ofwat to review the state of retail competition every two years based on the principles set out in the Cave Review s Terms of Reference. (ii) Abstraction licence and discharge consent regimes: a fuller assessment and costs/benefits analysis of competition will be set out in the final report. At this stage the Review makes some recommendations with a view to incentivise new water and wastewater suppliers to enter the market: -- The charging regime should be reformed to reflect social, economic and environmental costs of water abstraction and discharge. A new system could be designed to enable permit holders to be compensated for loss of permits, for vulnerable consumers to be supported and for environmental benefits to be secured. Such reform would be implemented around 2012; -- Trading of permits and raw water should be encouraged to provide a benchmark of the true price of water and support the introduction of competition. This could involve the EA to become a market participant and 4
the design of appropriate trading rules This would be implemented after 2015; and -- Once environmental sustainability has been obtained and permits are timelimited an auction system for permits could be established. (iii) Upstream competition: a fuller assessment and costs/benefits analysis of competition will be set out in the final report. The Review considers that upstream competition is potentially more complex and costly to institute than retail competition and, whilst there are good grounds to consider the introduction of upstream competition after retail competition, the decision is some way off. Accordingly, whilst the report identifies a series of changes in the legislative and regulatory framework of upstream markets that may be required if further competition was to be introduced, it does not offer a final view or immediate recommendations to that effect. The Government has announced its intention to consult on a Water and Floods bill in the Spring of 2009. DEFRA has stated that the bill will include "any changes that may be required to the competition regime as a result of recommendations from the current independent review". On 24 November 2008, in its 2008 Pre-Budget Report, the Government has announced that DEFRA will launch a public consultation on the implementation of the 5 megalitre eligibility threshold early in 2009, and will consult on the implementation of the other measures announced in the Pre-Budget Report regarding retail competition for large non-household users as part of the Water and Floods bill. Walker Review In February 2008, the Walker Review was launched by DEFRA to review the charging for household water and sewerage services. By virtue of this Supplement, the following paragraph is hereby included below the paragraph entitled Other Restrictions on Charging on page 73 of the Prospectus: The Walker Review of charging for household water and sewerage services In February 2008 DEFRA launched an independent review of charging for household water and sewerage services (the Walker Review"). The Walker Review, announced in "Future Water the Government's Water Strategy for England" published on 7 February includes the examination of the current system of charging for households for water and sewerage services in response to the more acute pressure on supply and demand, a greater awareness of wider environmental impacts and the increasing concerns about fairness and affordability in the existing system. It will include consideration of social, economic and environmental concerns and will make recommendations which could include changes to current legislation and guidance. On 14 November 2008 the Walker Review published a call for evidence and responses are required by 19 December 2008. An interim report for consultation is likely to be published in Spring 2009 with the final report being published later in the year. Amendment to details of the Directors of the Issuer and Obligors On 10 September 2008, Paul DeSouza resigned from his position as director of TWUL and Ross Israel was appointed to the board of directors of TWUL. By virtue of this Supplement, the wording Paul DeSouza (alternate to Christopher Deacon) became an alternate director of TWUL in July 2007. He is a principal in the global infrastructure 5
team at Queensland Investment Company and has extensive experience in infrastructure and utilities. Before joining Queensland Investment Company, he was a director in the infrastructure advisory and lending business of ING Bank in London contained in the paragraph entitled Directors of TWUL on page 42 of the Prospectus is hereby deleted and replaced with the following wording: Ross Israel became a director of TWUL and TWH in September 2008. He is the head of the global infrastructure division of Queensland Investment Corporation and has fourteen years experience in the infrastructure investment market as well as a corporate advisory and asset management background. Before joining Queensland Investment Corporation, he was DUET s Chief Operating Officer. On 30 September 2008, Robert Bloor resigned from his position as director of the Issuer and on 28 November 2008, Stuart Ledger was appointed to the board of directors of the Issuer. By virtue of this Supplement, the wording The directors of the Issuer are Andrew Beaumont and Robert Bloor contained in the paragraph entitled Directors of the Issuer on page 43 of the Prospectus is hereby deleted and replaced with The directors of the Issuer are Andrew Beaumont and Stuart Ledger. By virtue of this Supplement, the wording Robert Bloor became a director of the Issuer in October 2007. He is a project manager for the Thames Water Group and, in particular, is responsible for managing the Thames Water Group s exit from non-regulated activities. He is a member of the Chartered Institute of Management Accountants and has worked in the water industry for over 10 years in a range of finance roles, with extensive experience in the regulated U.S. Water Business, where he was a director of a number of subsidiaries of American Waterworks Inc contained in the paragraph entitled Directors of the Issuer on page 43 of the Prospectus is hereby deleted and replaced with the following wording: Stuart Ledger became a director of TWUF in September 2008, and became a director of the Issuer and TWUCFH in November 2008. He is the financial controller at Thames Water and is a qualified accountant. Before joining Thames Water in 2008, Stuart was the financial controller at Wolseley Plc. On 30 September 2008, Robert Bloor resigned from his position as director of TWUF and Stuart Ledger was appointed to the board of directors of the TWUF. By virtue of this Supplement, the wording The directors of TWUF are Andrew Beaumont and Robert Bloor and their principal activities are described in Directors of the Issuer above contained in the paragraph entitled Directors and Company Secretary of TWUF on page 44 of the Prospectus is hereby deleted and replaced with The directors of TWUF are Andrew Beaumont and Stuart Ledger and their principal activities are described in Directors of the Issuer above. On 10 September 2008, Paul DeSouza resigned from his position as director of TWH and Ross Israel was appointed to the board of directors of TWH. By virtue of this Supplement, the wording The directors of TWH are Sir Peter Mason KBE, Martin Baggs, Christopher Deacon, Peter Dyer, Charles Lynam, Lincoln Webb, Martin Stanley, Gordon Parsons, Luis Abraira, Rosamund Blomfield-Smith, Dipesh Shah, Peter Crone (as alternate to Rosamund Blomfield-Smith), Pilar Gomez (as alternate to Luis Abraira), William McKenzie (as alternate to Dipesh Shah), Stan Kolenc (as alternate to Lincoln Webb), Paul DeSouza (as alternate to Christopher Deacon) and Edward Beckley (as alternate to Gordon Parsons). Their principal activities are set out in TWUL under Directors of TWUL and Corporate Governance above, with the exception of Peter Dyer and Charles Lynam contained in the paragraph entitled Directors and 6
Company Secretaries of TWH on page 44 of the Prospectus is hereby deleted and replaced with the following wording: The directors of TWH are Sir Peter Mason KBE, Martin Baggs, Christopher Deacon, Peter Dyer, Charles Lynam, Lincoln Webb, Martin Stanley, Gordon Parsons, Luis Abraira, Rosamund Blomfield-Smith, Dipesh Shah, Peter Crone (as alternate to Rosamund Blomfield-Smith), Pilar Gomez (as alternate to Luis Abraira), William McKenzie (as alternate to Dipesh Shah), Ross Israel (as alternate to Christopher Deacon) and Edward Beckley (as alternate to Gordon Parsons). Their principal activities are set out in TWUL under Directors of TWUL and Corporate Governance above, with the exception of Peter Dyer and Charles Lynam. On 30 September 2008, Robert Bloor resigned from his position as director of TWUCFH and on 28 November 2008, Stuart Ledger was appointed to the board of directors of TWUCFH. By virtue of this Supplement, the wording The directors of TWUCFH are Andrew Beaumont and Robert Bloor and their principal activities are described in Directors of the Issuer above contained in the paragraph entitled Directors of TWUCFH on page 45 of the Prospectus is hereby deleted and replaced with The directors of TWUCFH are Andrew Beaumont and Stuart Ledger and their principal activities are described in Directors of the Issuer above. To the extent that there is any inconsistency between any statement in this Supplement and any other statement in or incorporated by reference in the Prospectus, the statements in this Supplement will prevail. Save as disclosed in this Supplement, no other significant new factor, material mistake or inaccuracy relating to information included in the Prospectus has arisen or been noted, as the case may be, since the publication of the Prospectus. Investors should be aware of their rights under Section 87Q(4) of the FSMA. 7