Thames Water, which serves approximately a quarter of the UK’s population, faces a challenging future following KKR’s withdrawal from plans to acquire the utility company. It has put the company on the back foot at present. Running almost exclusively in and around London, the company is facing tremendous financial woes, with debts reaching nearly £19 billion.
The company has 8,000 workers. Just last week, an independent review of the water industry found major systemic failures throughout the entire industry, placing the company and the entire sector at risk. Sir Jon Cunliffe, a former deputy governor of the Bank of England, chairs the independent review. It points to the billpayer and environmental harm from such lax enforcement while underscoring the continued need for stronger regulatory protections. Sir Cunliffe highlighted the confusion of the current regulatory structure as noted on page 2 of this report. He noted that the conflicting mandates between regulators create an incoherent and costly patchwork.
With KKR’s withdrawal from negotiations, Thames Water leadership turned their attention to finding other support. Castle Water stands ready to help Thames Water with similar financial support. They are badged as “ready, willing, and able” to assist. This development offers a glimmer of hope for the beleaguered utility as it seeks to stabilize its operations amidst ongoing challenges.
The independent review paints a concerning picture of the water industry in England and Wales, indicating it is “failing” and requires urgent reform. Sir Cunliffe observed that if the regulatory system is pretty rocky that will scare away all possible future long-term investors. He remarked, “If the water regulatory system is too volatile, too up and down, seeing the sort of problems we’re seeing at Thames, we won’t get those investors.”
Sir Adrian Montague, chair of Thames Water, was dismayed at KKR’s decision to pull out. For his part, Sweeney is optimistic that he may yet find a path forward. He stated, “We continue to believe that a sustainable recapitalisation of the company is in the best interests of all stakeholders and continue to work with our creditors and stakeholders to achieve that goal.”
Thames Water’s predicament is a symptom of deeper troubles roiling the rest of England and Wales’s water sector. The independent PRR report concluded that without more robust regulation and clearer governance in place, public confidence in the state of our water services will decay even further. As advocacy conversations continue with possible investors such as Castle Water, stakeholders and consumers should stay closely attentive.