Chinese firm a leading contender to buy Thames Water, reports say
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Version 1 of 3. Hong Kong’s CKI among those lining up to acquire struggling company if it collapses A Chinese firm is reportedly a leading contender to buy Thames Water if the heavily indebted company collapses in coming weeks. Hong Kong’s CKI, which invests in power and other utility companies in the UK, is among those lining up to acquire the water and sewerage supplier if it enters a special administration regime (SAR), according to the Times. It has reportedly said it would be prepared to operate under tougher penalties for environmental breaches than Thames’s class A creditors, who have put together their own purchase bid. The creditor group has said the company cannot afford to operate with an expected £1bn of fines coming down the track, which are levied by the regulator for breaches such as illegally dumping sewage. In May, Thames was hit with a record £104m fine over environmental breaches involving sewage spills. The environment secretary, Steve Reed, has in recent months stepped up preparations for the possibility of putting Thames into SAR – effectively a form of temporary nationalisation. On Tuesday the government confirmed it had appointed FTI Consulting to make contingency plans for a potential collapse. The appointment indicates that FTI is the first choice to act as administrator if the government enacted an SAR, although a court would ultimately approve such a step. Campaigners have said Reed should not sell off Thames Water immediately after an SAR, instead suggesting he should consider nationalising the utility. River Action wrote to him on Wednesday warning that writing off the company’s debts only to sell it to another private foreign investor would be a “profound betrayal of the public”. The group’s head of campaigns, Amy Fairman, said: “This crisis is a chance to rebuild [Thames] for public benefit, not private profit. Labour campaigned hard during last year’s election on promises to get a grip on the water crisis and act tough on failing water companies. This is a chance to chart a new course, not repeat the mistakes of the past by selling to overseas buyers eyeing a bargain.” Thames, which supplies 16 million customers in London and south-east England, has been racing to pull together a deal to avoid financial collapse. The government has been trying to avoid such an outcome, with the Treasury threatening that a potential £4bn bill from the SAR could be forced on to Reed’s department. This process would ensure that the taps stayed on for customers but would heap immediate costs on to the government. Thames faced embarrassment earlier this year when its preferred bidder, KKR, pulled out of a deal at the last minute. Now, its class A creditors, who hold the bulk of the company’s senior debt, are in talks with the regulator for England and Wales, Ofwat, about a deal to inject capital into the company, which has £17.7bn of net debts and regulatory gearing of 84.4%. CKI has previously expressed interest in buying the company and wrote to Sir Adrian Montague, the chair of Thames, when KKR pulled out earlier this summer. Sign up to Business Today Get set for the working day – we'll point you to all the business news and analysis you need every morning after newsletter promotion The private infrastructure giant had previously been eliminated from the process despite tabling a multibillion-pound proposal, as Thames chose KKR as a preferred bidder and entered exclusive talks with the company. Ministers are said to be reassured by CKI’s extensive experience in operating assets at scale, such as UK Power Networks, but some MPs have raised concerns about the Beijing links of the network. The Chinese government’s sovereign wealth fund owns 9% of Thames Water. The former Conservative leader Iain Duncan Smith previously said on social media that a CKI acquisition “should be avoided at all costs”. A Thames Water spokesperson said: “Our focus remains on a holistic and fundamental recapitalisation, delivering a market-led solution which includes targeting investment grade credit ratings and returning the company to a stable financial foundation. Constructive discussions with our many stakeholders continue.” CKI was approached for comment. |