Committee publication · Correspondence · 2 September 2025
Correspondence from Thames Water regarding its evidence to the Committee, dated 20 August 2025
From: Environment, Food and Rural Affairs Committee
Inquiry: Reforming the water sector
Summary
Thames Water's chairman responds to the Committee's follow-up questions on its 15 July 2025 oral evidence regarding water sector reform. The letter addresses the KKR equity bid selection process, creditor status and involvement, recapitalisation plans including super senior financing, and PR24 investment progress. Thames Water defends its board decision-making and rejects criticism of legal fees, providing detailed meeting schedules and creditor transaction examples.
Key findings
- Thames Water's equity raise sub-committee concluded KKR's proposal was 'most compelling' based on valuation, financial effect, regulatory support, funding certainty, and operational experience, with other bidders deemed non-viable after Phase 1 assessment.
- KKR withdrew from the process; subsequent re-engagement from CKI and Castle Water was rejected as their proposals lacked updated terms and sufficient stakeholder support compared to senior creditors' parallel proposal.
- Thames Water disputes £79 million in legal fees cited by the Committee, stating estimated legal costs were approximately £67.6 million for the liquidity extension and interim restructuring plan.
- Super senior financing of £3 billion (first tranche £1.5 billion committed at 92.21% pro rata uptake from Class A/B creditors plus backstop) matures October 2027 and is expected to be refinanced via recapitalisation before AMP9, with no impact on customer bills in AMP8 or AMP9.
- PR24 investment reached £878 million (3.8% of final determination) in first three months of AMP8, exceeding AMP7's £480 million (4.6%) in absolute terms despite lower percentage reflecting larger programme scale.
Tone
ProceduralTopics
Key actors
Sir Adrian Montague, Thames Water Utilities Limited, KKR, Ofwat, CKI, Castle Water, Chris Weston, Coordinating Committee of Class A Creditors
Notable line
“KKR provided the most compelling proposal which was in the best interests of all stakeholders, including customers and the environment.”
Key Quotes
“KKR provided the most compelling proposal which was in the best interests of all stakeholders, including customers and the environment.”
“… the costs of the Plan would ultimately be borne by the creditors”
“£79 million is not an amount which we are aware of or recognise”
“Over 92.21% of such creditors took up the super senior funding, with £1,383,111,429 allocated in this way.”
Source · parliament.uk record ↗