- Key investor KKR pulled out of the rescue deal earlier this week
Thames Water faces a ‘very short and closing window’ to ensure its survival as a private business after a key investor pulled out of a crucial rescue deal, its major creditors have warned.
Private equity giant KKR abandoned its pledge to inject £4billion of equity to stabilise Thames Water’s balance sheet and ultimately return the company to the stock exchange in 10 years, it emerged on Tuesday.
KKR’s exit left Britain’s biggest water company once again circling the drain as it struggles to secure its future and avoid nationalisation.
The Thames Water Creditor Group said on Wednesday it would continue discussions with industry regulator Ofwat and the Government in the coming weeks, but warned there is little time to secure the ‘urgent and fundamental reset’ the debt-riddled utility requires.
The creditors confirmed they have the ‘committed capital, capabilities and expertise needed’ to ‘fix the root causes of Thames Water’s problems, restore its balance sheet, rebuild customer trust and fix the fundamentals of the business once and for all’.
Thames, which serves more than 16 million customers, kept the threat of nationalisation at bay in late March after judges dismissed an appeal against the company’s £3billion emergency bailout package.
Thames Water became the target of public outcry over sewage and pollution in the sector
Its chair Adrian Montague described KKR’s decision as to abandon the group’s rescue as ‘disappointing’.
Before KKR’s selection as preferred investment partner, rival suitors included Hong Kong’s CKI Infrastructure, UK-based Castle Water and a group of investors led by investment service Covalis.
Thames Water became the central target of public outcry over sewage and pollution in the sector, while firms also faced criticism over poor upkeep of infrastructure and bumper shareholder payouts.
It also comes as households around the country face double-digit bill increases in the coming years after a controversial funding package was approved by regulators.
A spokesperson for the Thames creditors said: ‘The [rescue] plan will break from the patterns of the past by delivering customers’ priorities and improved outcomes for the environment in the shortest possible timeframe.
‘The comprehensive recapitalisation proposal, which is fully-funded and targets a sustainable capital structure, will deliver substantial fresh investment to drive significant change under a new, highly experienced and accountable leadership team.
‘These investors have the funding and experience required to deliver a transformation of the company’s performance which marks a departure from past failings, creating a “new” Thames Water that works effectively alongside Government and regulators to deliver for the environment and economic growth.
‘The creditors believe that Thames Water requires an urgent and fundamental reset and there is a very short and closing window in which a market-led solution can succeed. Discussions with Ofwat and the Government will be advanced in the coming weeks to reach an agreement and turnaround for the benefit of customers and the environment.’
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