To no one’s great surprise, Kohlberg Kravis Roberts & Co (KKR), the American private equity firm, has decided against throwing Thames Water a £4bn lifeline.
The eye-watering sum had been part of a planned recapitalisation of Britain’s biggest water utility, on top of £3bn in bridging loans from its main creditors to keep it solvent.
Set to go into state-run administration
Unless it can persuade these same senior creditors to stump up yet more cash, the embattled water and sewerage company, which serves 16m customers across London and the Thames Valley, looks set to go into some kind of state-monitored administration.
Trying to blame Ofwat
The Thames spin machine is, predictably, in trying to frame Ofwat, the regulator, as the bad guy for having imposed a record £123m fine for it, Thames, spilling vast volumes of sewage into the environment – money, Thames says, it could spend on either fixing its kit or refinancing.
Don’t buy a word of it. Be in no doubt: This is all the fault of Thames. Not Ofwat, not government, not anyone but Thames.
£20bn of debt
It’s the inevitable end-product of decades of mismanagement by notables including Macquarie Bank of Australia, previously Thames Water’s lead shareholder, who set out along the perilous path of gearing up the asset with more and more debt to lower tax liabilities and, needless to say, ensure it and other investors were well remunerated.
With about £20bn of debt, Thames can barely service the interest despite a giant wall of cash in the form of customer bills coming in each month. What a shambles.
‘Desperation and delusion’
In a stunning public display of desperation and delusion, Thames CEO Chris Weston told a committee of MPs last month he believed Ofwat should allow his firm to spend the cash it was due to be fined for operational failures on improvements to correct those failures.
Anyone with one or two functioning brain cells knows that would simply set a precedent for other water companies to follow.
Rules are rules. And finally, Thames is being forced to accept that reality.
But there may be one final act left to play in this sorry saga.
‘It’s the hope I can’t stand’ – Clockwise
In a display of hope akin to that of Brian Stimpson, the headmaster played by John Cleese in the 1986 classic Clockwise, Sir Adrian Montague, chairman of Thames Water, said yesterday that “a sustainable recapitalisation” remained the “goal,” adding: “The board would like to thank the senior creditors for their continuing support.”
Echoes of Stimpson, who famously said: “It’s not the despair, Laura. I can take the despair. It’s the hope I can’t stand.”
