Published by Global Banking & Finance Review®
Posted on June 3, 2025
3 min readLast updated: January 23, 2026
Add as preferred source on GoogleThames Water risks nationalisation as KKR exits a crucial rescue deal, leaving the company struggling with debt and public backlash over environmental issues.
By Sarah Young
LONDON (Reuters) -Thames Water suffered a major setback in its fight to avoid nationalisation on Tuesday as it said U.S. private equity firm KKR had pulled out of a multi-billion pound rescue plan.
Britain's biggest water supplier has been pushed to the edge by its 18 billion pound ($24.35 billion) debt pile, and was banking on KKR investing about 4 billion pounds in new equity to effectively buy the company.
The government has said it is on standby in case Thames Water fails to recapitalise and needs to be temporarily nationalised in order to keep services running.
"The government is clearly keeping a very close eye on what's going on," Environment Minister Steve Reed told LBC Radio on Tuesday, after Thames Water said KKR had pulled out.
KKR declined to comment.
Thames Water is at the centre of a public backlash against the privatised water sector which has been blamed for polluting Britain's rivers and seas while hiking bills, and prioritising dividend payouts over investment in infrastructure.
Public outrage over frequent sewage spills has prompted tough action from regulators, but Thames Water bosses have said punitive fines are hindering its efforts at a turnaround.
Thames Water CEO Chris Weston warned in mid-May that in order to help the company attract equity and avoid a state rescue, it would need relief from fines estimated to come in at 900 million pounds over the next five years.
The government wants to reform the sector and has tasked former Bank of England deputy governor Jon Cunliffe with leading a commission to do so.
He said on Tuesday regulation needed to be overhauled. While water companies needed to be held to account, action should be proportional, he said.
"It means being able to help companies and support them when they need to improve so they don't wind up in this spiral going down," he told Sky News.
CREDITOR BAILOUT
KKR's withdrawal comes days after Thames was fined 123 million pounds for sewage failures.
The announcement sent Thames' bonds to record lows. Its 2040 bond dropped 4 pence in the pound to 69 pence while its euro-denominated April 2027 bond dropped 2 euro cents to just under 68 cents.
Chairman Adrian Montague said KKR pulling out after two months of due diligence was "disappointing".
Without fresh funding, Thames Water could run out of money in the middle of 2026.
Montague said the company, which has 16 million customers in southern England, would talk to its senior creditors, who have presented their own plan, likely to involve some equity investment and a debt-for-equity swap.
The creditors already effectively own the company after write offs by the previous shareholders. A creditor spokesperson declined to provide more details on their plan.
While environment minister Reed acknowledged the situation was "difficult", he said the company was stable, adding that the government was ready to step in.
Elected last July, the Labour government had promised to clean up Britain's waterways and get on top of the sewage scandal. But in setting up Cunliffe's water commission, it ruled out renationalisation as an option.
The interim report said risk in the sector needed to be reduced to attract investors willing to accept lower returns over the longer term.
($1 = 0.7403 pounds)
(Reporting by Sarah Young in London and Yadarisa Shabong in Bengaluru; additional reporting by Anousha Sakoui and Marc Jones, Editing by Mrigank Dhaniwala, Kate Holton, Tomasz Janowski and Susan Fenton)
Thames Water is facing a financial crisis due to an 18 billion pound debt pile and the withdrawal of KKR from a multi-billion pound rescue plan.
The UK government is on standby to temporarily nationalise Thames Water if it fails to recapitalise, ensuring that services continue to run.
Public outrage has been directed at Thames Water for frequent sewage spills and pollution of rivers and seas, leading to calls for reform in the water sector.
The government has tasked former Bank of England deputy governor Jon Cunliffe to lead a commission aimed at reforming the water sector to attract investors.
KKR's withdrawal has sent Thames Water's bonds to record lows and raises concerns that the company could run out of money by mid-2026 without fresh funding.
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