So much for the Barbarians riding to the rescue of poor benighted Thames Water. KKR, the New York firm often portrayed as a take-no-prisoners corporate raider, took a close look at Britain’s biggest water supplier — and decided even they did not fancy it.
Why KKR, which earned its Barbarians at the Gate reputation during the brutal takeover battle for biscuit maker RJR Nabisco in the late Eighties, walked away from the Thames Water fiasco it is not entirely clear.
The famously private firm is not saying. But the briefing behind the scenes suggests that the decision makers at KKR decided that the relentless political and regulatory hostility towards the water industry made it, to coin an oft used phrase about Thames Water, uninvestable.
But if KKR, veteran of dozens of takeovers all over the world, cannot make the case for an investment in a monopoly utility – albeit a heavily indebted one – then who can?
Thames were putting a brave face on yet another unexpected setback today, insisting that KKR found nothing “under the lid” of Thames that spooked them and that a refinancing plan B with major creditors will continue.
This is a headache the Government really does not need
Yet with every failure to put its perilous finances on an even keel Thames Water slides closer to a Government special administration – nationalisation in all but name.
This is a headache the Government really does not need. Having finally offloaded the last of its NatWest banking stake a mere 16 years after an emergency bailout at the height of the financial crisis, the last thing it wants is being dumped with responsibility for a new “too big to fail” corporate dud.
Of course, Thames Water’s debts at £19 billion, though chunky, do not represents a systemic threat to the British economy in the way that the nationalised banks did in 2008 and 2009.
But just as RBS (as NatWest was known then) could not be allowed to run out of money – the Chancellor at the time Alistair Darling feared riots on the streets within hours if the ATMs stopped doling out cash – neither, clearly, can Thames Water’s taps be allowed to run dry.
The owners, politicians, regulators and bosses who have been responsible for Thames Water since it was privatised in 1989, must all take some blame
We are a very long way from that, but Thames is a vital strategic national asset, it keeps 16 million other customers, including the King and the Prime Minister, across the capital and much of the south east supplied with the wet stuff so essential to life.
That the provider of a such a daily necessity can be mired in such a seemingly interminable struggle for survival – one that even the mighty KKR decided to put in the “too difficult” tray - is a shocking reflection on almost everyone involved.
The owners, politicians, regulators and bosses who have been responsible for Thames Water since it was privatised in 1989, must all take some blame for the dreadful situation the company now finds itself in.
Many have enriched themselves along the way, leaving behind a company stripped off financial resources unable to attract the investment it needs to, in turn, modernise a network, that as Thames Water poohbahs never cease to remind us, still relies on creaking Victorian infrastructure.
But it is the poor old customers and users of the Thames who suffer
Yet the blame game continues, with owners and managers pointing the finger at the regulators and the politicians, who in turn, egged on by furious public opinion, insist greedy bosses and shareholders are largely to blame.
But it is the poor old customers and users of the Thames who suffer, soaked for ever higher bills – they rose 31% in April – by a company that was last week fined more than £100 million for years of failures at its waste water plants.
Meanwhile, a legion of professional advisers, legal, financial and PR, continue to pick millions of pounds a year of what Mr Justice Leech rightly called “eye-watering” fees in the High Court earlier this year from the bones of Thames Water.
It is an unholy mess and perhaps KKR were right to walk away. If only the rest of us had that option.
Jonathan Prynn is the Standard’s Business Editor
