Thames Water in 'perilous position' as bidder KKR pulls out of rescue deal

The US private equity group KKR has pulled out of a deal to inject fresh equity into Thames Water, leaving the troubled supplier's future in doubt and increasing the prospects of a temporary nationalisation.

- Julia Kollewe Jasper Jolly

The UK's biggest water supplier had picked KKR as its preferred partner, but the company "indicated that it will not be in a position to proceed", Thames Water said.

MPs said Thames was now in a "perilous position", with some calling for the government to place it into a special administration regime (SAR), in effect a temporary nationalisation.

The environment secretary, Steve Reed, told parliament he expected Thames to continue to pursue a "market-led solution" of obtaining new funding from its creditors, though he acknowledged the government "stands ready to intervene with an SAR" if required.

Thames Water, which provides services to 16 million customers in London and south-east England, has the biggest debt burden of any water company in Britain, at about £20bn. It has become the symbol of the alleged mismanagement of the water industry since privatisation, with years of dividend payouts to shareholders fuelling deep public anger over creaking infrastructure and sewage leaks.

The industry in England and Wales has "deep-rooted, systemic" problems, according to an interim review published yesterday by Sir Jon Cunliffe, a former deputy governor of the Bank of England. Cunliffe said he would recommend changes to simplify regulation of the sector.