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Thames Water faced a significant setback as US private equity giant KKR backed out of plans to purchase the company, which would have injected £4bn into the UK’s largest water company. The withdrawal of KKR raises concerns about the potential collapse of Thames Water into government-supervised administration. Despite this setback, Thames Water remains determined to explore alternative options to secure its future and avoid administration, labeling the news as “disappointing.”
With a customer base consisting of about a quarter of the UK’s population, primarily in London and southern England, Thames Water assured that its water services will continue without disruption, regardless of ownership changes. Currently, the company is effectively owned by its lenders, with a consortium prepared to raise equity through a fully funded plan. As the company navigates through this challenging period, stakeholders are focusing on achieving a sustainable recapitalization to benefit all parties involved.
The withdrawal of KKR coincided with the release of interim findings from an independent commission assessing reforms within the water industry. Many viewed this review as a potential catalyst for attracting new investments. Sources close to the situation highlighted the political challenges surrounding the water sector, citing it as a deterrent for potential investors. Thames Water’s chairman, Sir Adrian Montague, acknowledged the disappointment of KKR’s retreat but emphasized the ongoing efforts to collaborate with creditors and stakeholders to pursue the best path forward. Discussions regarding the senior creditors’ plan are set to progress with relevant stakeholders, including Ofwat.
Alistair Carmichael, Chair of the Environment, Food and Rural Affairs Select Committee, expressed concerns over Thames Water’s decision to exclusively pursue one bidder early on in the takeover bid process. These concerns were heightened by KKR’s withdrawal, putting Thames Water in a precarious position. Despite the government’s readiness to intervene if necessary, Thames Water secured a £3bn rescue loan earlier in the year to facilitate restructuring. Since its privatization in 1989, the company has accumulated significant debts, reaching approximately £19bn. The need for regulatory reform was echoed by an independent review chaired by Sir Jon Cunliffe, emphasizing the importance of long-term investors to ensure the sector’s stability and viability
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