Thames Water deal collapse puts Whitehall on stand-by

THAMES Water has been dealt a blow after US private equity giant KKR pulled out of plans for a rescue deal to inject much-needed cash into the troubled utility.

- By WILL DURRANT, RHIANNON JAMES AND HOLLY WILLIAMS

Britain's biggest water supplier, which has 16 million customers, chose KKR at the end of March to be its preferred bidder under plans to invest around £4billion of new equity to help keep the financially stricken company afloat.

But Thames Water said on Tuesday KKR was now not "in a position to proceed" and its status as preferred bidder had lapsed.

The heavily indebted utility said the decision was "disappointing" but added it was instead taking forward talks with "certain senior creditors" on an alternative plan to recapitalise the business.

It will also hold discussions with regulator Ofwat on the senior creditors' plan.

The withdrawal of KKR raised the spectre of a temporary government nationalisation of Thames Water once more, should it fail to secure a rescue deal.

But keeping Thames Water afloat through public ownership could draw money away from the NHS, the Environment Secretary warned later in the Commons. Steve Reed said nationalisation was "not the answer".

Thames Water faces around £19bn of debt and the company's chairman Sir Adrian Montague previously warned the Commons Environment, Food and Rural Affairs Committee that there were "hair-raising" moments in the last year when the firm had five weeks' worth of cash left before going bust.