The problematic utility is in discussions with “certain senior creditors” about alternative plans to recapitulate the business.
Thameswater was hit after our private equity giant KKR was pulled out of a rescue contract plan and injected much-needed cash into the problematic utility.
With 16 million customers, the UK’s largest water supplier chose KKR at the end of March, becoming a preferred bidder with plans to invest around £4 billion of new stocks to maintain the financially struck company.
However, Thames Water said KKR is now “not in a position to proceed” and that bidders whose status was favored have expired.
The large utility said the decision was “unfortunate”, but added that instead it is in discussions with “certain senior creditors” about alternative plans to recapitulate the business.
It will also host discussions with regulators over senior creditor planning.
The withdrawal of the KKR will again trigger the ghost of temporary government nationalisation of Thames water if it fails to secure a rescue contract.
Related Stories
Environment Secretary Steve Reed said “The Thames itself remains stable,” but added that “the government is clearly monitoring what is happening.”
Reed told LBC Radio: “We are monitoring the situation, but there is no disruption to the water supply.
“The Thames have many options they are exploring.”
He said Thames’ water “as things stand,” but the government was “a stable and ongoing company,” but the government was “prepared for all sorts of unforeseen circumstances.”
“If there’s a violation and the situation arises at a water company where it needs to be put into special control, it’s going to happen, but as things stand, it doesn’t currently apply to any company,” Reid said.
An inundated sewage pump station run by Thameswater in Lightlands Lane, Cookham, Berkshire, with dateless file photos. Andrew Matthews/PA
The move by KKR, as a preliminary report by the Independent Water Commission on Tuesday, showed that the water sector in England and Wales needed a “basic reset” and a more supervisory approach to “strengthening and rebalancing” OFWAT’s regulatory role and its oversight.
Thames Water Chairman Ir Adrian Montague said: “While today’s news is disappointing, we continue to believe that the company’s sustainable recapitalization is in the best interests of all stakeholders and continues to work with creditors and stakeholders to achieve that goal.
“The company therefore advances discussions regarding the planning of senior creditors with OFWAT and other stakeholders.
“The Board would like to thank senior creditors for their continued support.”
KKR declined to comment.
It is understood that Thames Water is currently on the way to go at a pace with alternative plans with senior creditors.
These creditors are bondholders who effectively own Thames water after they approved fiscal restructuring earlier this year through loans of up to £3 billion so that the High Court can continue running until the summer of 2026.
Thames Water is liable to around £19 billion, and lawmakers reportedly last month that at some point this year, they had around five weeks of cash left before they became busts.
That was before we secured a £3 billion loan agreement.
However, putting your finances on a stable long-term footing still requires considerable ongoing financial support.
Thames Water said in March that it would also continue to discuss with senior creditors over parallel alternative transactions, given that the contract with KKR is not yet on the verge of certainty.
The group was under further pressure last week when they were fined a record £122.7 million by OFWAT after it was found out that rules on sewage treatment and dividend payments had been broken.
In early May, Thameswater CEO Chris Weston told MPS that if the company faces a fine that is too expensive, it would be difficult to get new investments.
It is also believed that the water sector needs major reforms to secure new investments.
Water companies face public and political outrage over pollution, rising bills, high dividends, and the scope of enforcement wages and bonuses.
Thames was even more angry at the plan to hike consumer water bills for customers at an average of 31% in April and pay a massive bonus linked to a water company securing emergency loans of £3 billion.
These plans were withdrawn after Montag admitted that he misrepresented the so-called retention plan “argued” by the company’s lender.
