Without a paddle? As a potential buyer pulls out, Thames Water's woes deepen

Thames Water came close to collapse this year when it almost ran out of money.

- Jasper Jolly

But after agreeing to exclusive takeover talks with the US private equity company KKR, the debt-laden utility was hoping for a quieter period as it sorted out the details.

Those hopes were extinguished on Tuesday after KKR said it was withdrawing its bid, to the shock of Thames Water and its creditors.

It is those creditors, some of whom bought Thames's debt at a big discount in the hope of a quick profit, who have been left, without warning, with the responsibility for pulling together billions of pounds to carry out a turnaround that could take 15 years.

Thames Water has been through a tumultuous year. It had a close shave with bankruptcy, a high court battle to secure £3bn in emergency investment, and was the subject of several testy parliamentary hearings. It must invest £20bn over the next five years to fix leaking pipes and water treatment works, all while public anger mounts over sewage in Britain's rivers and seas.

KKR balked at the complexity of taking on Thames Water amid so much scrutiny and with multiple stakeholders in play, according to a person close to the talks. Partners at the firm had carried out 10 weeks of intensive due diligence, including several visits to wastewater treatment works, and had relied on a small army of up to 200 advisers to carry out detailed assessments. The state of some of the Thames assets was worse than KKR had initially thought, according to another source.

New York-based KKR, short for Kohlberg Kravis Roberts, had set 15 members of its European infrastructure team, run by the executive Tara Davies, to work on the Thames bid, with James Gordon serving as the lead partner. (Both formerly worked for Macquarie, the Australian investment bank criticised for taking dividends from Thames Water while building up debt - although they are not thought to have worked on Thames Water.)