‘Barbarians at the gates’ come for Thames Water

A US private equity firm is in pole position to buy Thames Water as the embattled utility tries to stave off a looming cash crunch.

New York-based KKR, whose staff were once dubbed “barbarians at the gates” for their aggressive culture, has entered the second stage of negotiations over a potential cash injection that would help the company avoid collapse.

However, Thames Water said there was no certainty that a deal would be reached as it remained subject to due diligence and regulatory approvals.

A takeover of Thames by KKR would reduce the risk that the utility requires a government-backed bailout if it runs out of cash.

Bosses said senior creditors, which include hedge funds Elliott and Apollo, are continuing separate discussions over an equity raise in case the deal falls through.

Thames, which serves 16m customers across London and the South East, recently agreed a £3bn emergency loan from its creditors.

But the company, which is struggling under debts of roughly £20bn, is now seeking billions of pounds in fresh equity to shore up its finances and avoid unprecedented renationalisation.

Thames’s existing shareholders, who include the sovereign wealth funds of China and Abu Dhabi as well as the pension funds USS and Omer, last year walked away from the company, branding it “uninvestable”.

The apparent breakthrough comes days after Thames announced the surprise departure of its chief financial officer.

The company last week said that Alastair Cochran, who has been at the company since 2021 and recently served as interim chief executive, will step down within days.

The financial crisis at England’s biggest water supplier comes amid public anger over rising bills and sewage leaks.

Thames plans to raise average water bills by £31 a year, meaning the average annual household bill would jump from £436 to £588 between now and 2030.

Bosses have argued the price rises are necessary to fund a £21bn investment in the company’s crumbing Victorian infrastructure.

But Thames has faced vocal opposition from rival creditors and campaigners including Charlie Maynard, the Liberal Democrat MP for Witney in Oxfordshire.

Mr Maynard argued against the £3bn emergency loan, saying the Government should instead step in to nationalise the utility. He described the restructuring as “simply throwing good money after bad”.

KKR’s selection as preferred bidder comes after it saw off competition from rival suitors, who are reported to have included Hong Kong giant CKI Infrastructure, UK-based Castle Water and a French consortium led by Covalis.

Thames said KKR’s proposal included financial metrics that indicate a “material impairment” of the company’s class A debt, while other aspects of the deal remain under discussion.

Thames Water said: “The company remains focused on putting Thames Water on a more stable financial foundation, implementing its turnaround plan and delivering a market led solution that is in the best interests of customers, UK taxpayers and the wider economy.

“Agreed transaction terms are targeted for the second quarter of 2025 with a view to completing a recapitalisation in the second half of 2025.”