Thames Water has been dealt yet another blow, after US private equity firm KKR pulled out of plans to invest in the heavily indebted supplier.
KKR had been chosen by the embattled water company as its preferred bidder at the end of March to invest more than £3 billion of new equity to help keep it operating, amid fears the supplier was running out of cash.
But the investment firm has now indicated it would not be in a position to proceed with a bid, leaving the future Britain’s biggest water supplier with 16 million customers in doubt.
Thames Water is now progressing talks with senior creditors for an alternative to stabilise its finances and said it intends to take forward discussions with “certain senior creditors” on an alternative plan to recapitalise the business.
It will also hold talks with regulator Ofwat on the senior creditors’ plan alongside other stakeholders.
Sir Adrian Montague, chairman of Thames Water, said: “Whilst today’s news is disappointing, we continue to believe that a sustainable recapitalisation of the company is in the best interests of all stakeholders and continue to work with our creditors and stakeholders to achieve that goal.
“The company will therefore progress discussions on the senior creditors’ plan with Ofwat and other stakeholders.
“The board would like to thank the senior creditors for their continuing support.”
While KKR was the company’s preferred bidder, it said at the time it would also continue talks with senior creditors on a parallel alternative transaction, given there was no certainty over a deal being finalised with KKR.
But the withdrawal of KKR raises the spectre of a temporary government nationalisation once more, should it fail to secure a rescue deal.
Thames Water is about £19 billion in debt and MPs were told last month that at one point this year it had about five weeks’ worth of cash left before going bust.
That was before it secured an extra £3 billion loan deal, which effectively stopped it from being renationalised and falling under Government control.
It comes after a new interim report found the water sector in England and Wales needs a “fundamental reset” after being plagued with “deep-rooted, systemic” failures.
The Independent Water Commission calls for a “fundamental strengthening and rebalancing” of Ofwat’s regulatory role, calling for the watchdog to adopt a more supervisory approach to its oversight of water firms on Tuesday.
This could include benchmarking companies against one another to justify customer bills and assess efficiency.
It also urges the Government to provide clearer direction, proposes greater regional decision-making around local water systems and emphasises the need for a greater focus on long-term, responsible investment and ownership within the industry.
More follows on this breaking news story…
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