The future of Britain's biggest water supplier has been called into question as plans for its takeover have fallen through after the loss of a prospective investor.
It is the latest blow in an endeavour to rescue the financially-burdened utility provider, Thames Water.
Private equity giant KKR was identified as the utility company's preferred bidder, thanks to plans of a potential investment of £4 million of new equity.
However, Thames Water has now confirmed that KKR is no longer "in a position to proceed" with the deal, calling it a "disappointing" decision.
KKR has declined to comment, but the move follows an interim report by the Independent Water Commission which found that the water sector in England and Wales is in need of a "fundamental reset".
The Commission called for a “strengthening and rebalancing” of Ofwat’s regulatory role and a more supervisory approach to its oversight.
The news has added fuel to a debate over a potential need for a temporary government nationalisation of Thames Water, should it fail to secure a rescue deal.
Debt levels facing the company are understood to stand at around £19 billion, and in one instance this year Thames Water was left with enough cash to last it five weeks before going bust.
A £3 billion loan deal has been secured after the High Court approved the financial restructuring of the company, effectively stopping it from becoming nationalised under Government oversight by ensuring it can continue running until the summer of 2026.
Thames Water has advised that it is in talks with "certain senior creditors" to agree on an alternative plan to recapitalise the business in light of KKR's decision.
According to Environment Secretary Steve Reed in a discussion with LBC Radio, "Thames have got a number of options that they're exploring", with the government keeping "a very close eye" on matters.
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Sir Adrian Montague, chairman of Thames Water, said: “Whilst today’s news is disappointing, 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.
“The company will therefore progress discussions on the senior creditors’ plan with Ofwat and other stakeholders.”
Thames Water is under heightened pressure as of late following a record fine by Ofwat of £122.7 million for breaking rules concerning sewage treatment and the payment of dividends.
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