Concerns over the selection by Thames Water of US private equity giant Kohlberg Kravis Roberts (KKR) in a bid to secure vital investment and stabilise its finances was raised by Labour peer and accountant Prem Sikka.
The heavily indebted supplier, which has around 16 million customers, announced at the end of March that KKR would go through to a second phase of the process to secure equity investment.
The company is hoping to finalise terms of a possible deal with KKR in the second quarter, with the aim of completing in the second half of the year.
However, Thames Water said there was still “no certainty” over an agreement pointing out “certain senior creditors continue to progress in parallel alternative transaction structures to seek to recapitalise the business”.
The group’s decision to proceed with KKR came after it said it had received six approaches from firms to pump in investment and cash in return for a stake in the business. But speaking in the UK parliament, Mr Sikka said: “Thames Water was put on the road to ruin by private equity. Now its shareholders have designated KKR, another private equity group, as their preferred bidder.
“KKR’s business model is profiteering, high-leverage, low-investment, asset-stripping and high-cash extraction. That will inevitably multiply Thames’s problems.”
Responding, environment minister Sue Hayman said: “Regarding the company choosing KKR as its preferred bidder in the ongoing equity raise process, clearly Thames Water is a commercial entity engaged in a public equity raise, and it would therefore be completely inappropriate for the government to comment on that.
“However, I note that the company had a number of potential bidders to choose from, which indicates that a market-led solution to the financial resilience of the company is a possibility.”
Earlier, the minister told peers that the industry regulator, Ofwat, continued to engage with the company “to ensure the delivery of the financial and operational turnaround that both customers and the environment deserve”.
Thames Water has given 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”.
Thames Water was contacted for comment.
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