Investors line up ahead of Thames Water deadline for £3.3bn equity raise

A water supplier to more than 450,000 businesses and public sector groups has reportedly emerged as one of the leading contenders to rescue stricken Thames Water ahead of this week’s deadline for bids from potential investors.

Debt-laden Thames Water, which is the UK’s biggest water supplier, has asked possible investors to put forward indicative bids by the end of Thursday as it looks to secure a multibillion-pound cash injection to stave off nationalisation.

Castle Water – founded by former investment banker John Reynolds and co-owned by Conservative Party treasurer Graham Edwards – is understood to be preparing to put forward a proposal to pump in around £4 billion into Thames Water in return for a majority stake.

If successful, it is said to be ultimately planning to list Thames Water on the stock exchange.

Scottish-based Castle Water completed the buyout of the non-household arm of Thames Water in 2017, and now serves hundreds of thousands of businesses, charities and public sector groups.

It has the backing of the billionaire Pears family behind the William Pears Group – a financing and property firm, which is understood to be providing the funding for Castle Water’s approach.

Other possible investors preparing to put in bids reportedly include Hong Kong firm CK Infrastructure Holdings and private equity giant KKR, which together own stakes in Northumbrian Water.

It is thought that Thames Water and its adviser Rothschild have also sounded out investment giants Brookfield Asset Management and Carlyle Group.

Thames Water, which serves about 16 million people, is in the grip of a funding crisis and only has enough cash to continue operating until early next year.

It needs at least £3.3 billion in equity over the next five years, while it is also more than £16 billion in debt.

The group has been at the centre of growing public outrage over the extent of pollution, rising bills, high dividends, and executive pay and bonuses at the UK’s privatised water firms.

Regulator Ofwat has appointed an independent monitor to supervise Thames Water as it attempts a turnaround.

But the process for an equity injection cannot be finalised until after December 19, when Ofwat will give its final verdict on Thames Water’s five-year business plan, including proposals for customer bill hikes and investment.

As well as seeking to raise equity, Thames is also in the middle of a debt restructuring and recently appointed Julian Gething – a director of turnaround firm Alix Partners – as chief restructuring officer to oversee the process.

Thames Water still needs the emergency funding plans to be passed in court though, and is aiming for a December 17 hearing.