KKR, one of the world’s biggest private equity investors, is advancing plans to play a crucial role in a rescue of Britain’s biggest water supplier.
Sky News has learnt that KKR, which manages assets of more than $600bn, has hired investment bankers and lawyers to help formulate a plan to inject billions of pounds of equity into the company, which has more than 15m customers.
PJT Partners has been engaged to act for KKR on its interest in Thames Water ahead of a deadline for proposals for an equity raise later this month, according to insiders.
The appointment of PJT implies that KKR is seriously interested in aiding a rescue of Thames Water, which is drowning under £19bn of debt and faces the prospect of temporary nationalisation amid a bitter legal fight among rival creditor groups.
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A hearing at the High Court beginning on Monday pits one syndicate of lenders – which want to extend up to £3bn of financing to the company – against another group, which has submitted an alternative plan that it insists is cheaper.
Without the new financing, Thames Water could be forced into an insolvency process known as special administration, which has been used in the UK before in the case of the domestic energy supplier Bulb.
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Special administration would probably cost the government billions of pounds while a break-up of Thames Water is finalised or a buyer is found, and Sir Keir Starmer’s administration has said it wants to avoid such an outcome.
However, political pressure is mounting from critics of the company who argue that it should not be allowed to add to its debt burden.
Charlie Maynard, the Liberal Democrat MP for Witney and a long-standing campaigner for an overhaul of water company regulation has submitted a witness statement to the court, urging it to reject a restructuring plan which has secured the endorsement of Thames Water’s board.
“Successive governments have watched on as Thames Water has plunged themselves into billions of pounds of debt,” Mr Maynard said.
“Thames Water is running out of money, it is operating in breach of its licence, it is unable to pay its debts and its customers are suffering for it.
“The deal the creditors are pushing for serves their interests only; it is a short-term fix at the expense of the company, Thames Water customers and UK taxpayers.”
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Approval of the £3bn debt financing would buy the company time to raise new equity.
In addition to KKR, the Hong Kong-based investor CK Infrastructure Holdings, Covalis and Castle Water have all been linked with potential offers.
Industry sources believe that KKR and CK Infrastructure offer the most credible paths to an equity raise, although there is no certainty that any of the interest will result in firm proposals.
The emergence of KKR’s work with advisers also comes in the same month that Thames Water is required to decide whether it wants to appeal against an Ofwat ruling on its spending plans for the next five years.
Thames Water requested permission to increase prices for customers by 53% over five years but was told by the industry regulator it would be restricted to a 35% increase.
A number of other water companies are also considering appeals.
Last autumn, the environment secretary, Steve Reed, established an independent review of the industry that will look at far-reaching reforms.
It remains unclear which of KKR’s funds is participating in the Thames Water equity-raise process, which is being run by bankers at Rothschild.
The firm owns John Laing, an infrastructure investor, which it took private in 2021.
It also previously owned South Staffordshire, another water company, selling its 75% interest in 2018.
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KKR declined to comment.
