Thames Water could be sold to a Chinese firm after public rescue

Times

3 days ago

Ministers are preparing to take Thames Water into temporary public ownership in a rescue that could pave the way for it to be sold off to a Chinese infrastructure company.
Steve Reed, the environment secretary, is understood to be making 'active preparations' to put Britain's largest water utility into a special admin­istration regime (SAR). That would, in ­effect, nationalise Thames, wiping out much of its £16.8 billion debt, as the ­government looks for a new buyer.
The Times understands that one of the leading contenders is CKI, which has said it could take over Thames within weeks of it going into special ­administration.
CKI has made clear that it would be prepared to operate within the new regime of tougher fines for environmental infringements, which Thames's creditors say is financially unviable.
The company already owns Northumbrian Water and UK Power Networks. Selling Thames to CKI would be controversial.
Concern about Chinese control of critical ­infrastructure is widespread, and this year CKI's parent company sold its interest in the Panama ­Canal port operator under pressure from President Trump.
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Yesterday, Reed approved the ­appointment of FTI Consulting to advise on contingency plans for Thames to be placed into special administration, which would ensure that customers continued to receive water and sewerage services should Thames collapse, but could put taxpayers on the hook for billions of pounds in bailout costs when the public finances are already severely constrained.
The special administration process can be instigated only in the event that a company becomes insolvent, can no longer fulfil its statutory duties or breaches an enforcement order.
The government could in effect force the company into special administration if it does not agree to the bailout terms being proposed by creditors.
Reed has previously stressed his desire to avoid taking Thames into temporary public ownership, but has said that he was ready for 'all eventualities'.
Two senior government sources said the situation had changed and a taxpayer bailout was the most likely option. One said: 'The political benefits of an SAR are apparent to us and it is now something we are looking very seriously at and preparing for it to happen.'
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Another suggested it was now the government's favoured option in the absence of a better deal from creditors.
A source close to the creditors said they had had no direct contact with ministers and warned that effectively wiping out Thames debtors would send a 'chilling message' to other investors.
'It would look like the government siding with one institution with close links to the Chinese state at the expense of blue-chip UK financial institutions,' they said.
Thames has been in financial crisis since the spring of last year when international shareholders quit the company saying it was no longer investable. It is the worst in the sector for pollution incidents and mains leakages.