KKR in Talks with Thames Water

(Reuters) – U.S. investment group KKR is in talks with troubled British utility Thames Water and its advisers about participating in a £3 billion ($3.88 billion) share sale, part of a wider recapitalization plan, according to Sky News on Saturday.

Both Thames Water and KKR declined to comment.

Thames Water, serving approximately 16 million people in and around London, is facing a crisis due to sewage dumping, deteriorating pipe networks, and significant debts.

In October, the utility, Britain's largest water supplier, announced it had secured a financing lifeline of up to £3 billion with several creditors. If approved, this deal would help it survive for at least another year.

KKR is among a select group of investors reviewing Thames Water's finances to support a rescue share sale, as reported by sources familiar with the matter.

KKR's final decision depends on a determination by water regulator Ofwat, expected by January at the latest. It remains unclear which of KKR's funds might be involved in the Thames Water capital raise, Sky News added.

A possible hurdle for KKR acquiring a significant stake in Thames Water is its 25% ownership in Northumbrian Water. The Competition and Markets Authority would need to evaluate the deal under Ofwat's mergers regime, though this does not mean there would be a guaranteed prohibition.

The British government is prepared to place Thames Water into a special administration regime due to the risk of a financial collapse.

($1 = £0.7736)