Troubled utility Thames Water has chosen US private equity giant Kohlberg Kravis Roberts (KKR) as its preferred bidder as it looks to secure a buyer to help stabilise its finances.
The heavily-indebted supplier – England’s biggest water firm, with about 16 million customers – said KKR would now go through to a second phase of the process to secure equity investment.
The supplier is hoping to finalise terms of a possible deal with KKR in the second quarter, with aims to complete in the second half of the year.
But Thames Water said there was still “no certainty” over a deal, adding that “certain senior creditors continue to progress in parallel alternative transaction structures to seek to recapitalise the business”.
Thames Water said: “The company is pleased to announce that, following a detailed assessment of proposals received, it has taken a further step in its plan to deliver a sustainable recapitalisation by selecting KKR to enter the Phase 2 diligence stage of the equity process as preferred partner.
“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.”
The group’s decision to proceed with KKR comes after it said recently it had received six approaches from firms to pump in investment and cash in return for a stake in the business.
Thames Water is in at least £16 billion of debt and was left on the brink of a possible taxpayer backed rescue as it was in danger of running out of cash.
It recently won court approval to take out as much as £3 billion more in loans, in a deal designed to keep it running into 2026.
Thames Water gave few details over KKR’s proposal, except to say it included a “material” reduction of its debt and that talks were still ongoing over “other aspects of the proposal”.
KKR, which is also a minority shareholder in Northumbrian Water, is understood to have lodged a £4 billion equity bid last month in return for a majority stake.
Under its bid, KKR is believed not to be planning to break up Thames Water or sell off assets to raise funds for its bid.
It is also understood that Castle Water, a firm co-owned by Conservative Party treasurer Graham Edwards, was one of the parties that had approached Thames in recent months.
Another bid came from investment group Covalis, which could see the company broken up then relisted on the stock market, while CK Infrastructure, part of Hong Kong’s CK Hutchison group, is likewise thought to have been among those to make approaches.
On Friday, Thames Water’s chief financial officer Alastair Cochran told the firm he was stepping down by the end of the month in a surprise move given that the restructuring and sale process is not complete.
It marks another setback for the company, which has been at the centre of growing public anger over the state of the privatised water industry, as consumers face steeply rising bills while companies pump raw sewage into rivers and waterways.
