Embattled Thames Water has received a £5bn bid from Covalis Capital that would result in France’s Suez Group being brought in to manage a restructure of the UK’s largest water company.
The infrastructure investor Covalis Capital has submitted a bid for Thames Water, which has been on the verge of collapse for several months as it struggles with a £19bn debt pile, according to the Financial Times.
Covalis plans to provide about £1bn of the funds upfront and raise a further £4bn from sales of the struggling water company’s assets.
The asset sales could reportedly include breaking up parts of the company, such as its operations in the Thames Valley, and then pursuing a stock market flotation of the restructured business.
Under the plans, the UK government would retain a seat on the board and a “golden share”, which would give it certain rights to protect the provider of water and sewage services to 16 million customers across London and the Thames Valley.
Thames Water, which was hit earlier this year by shareholders pulling the plug on £500m of funding, needs £3.25bn to keep running and make infrastructure improvements by the end of the decade.
Suez, which has contracts to run water assets in France and employs 5,000 people in the UK, would act as an operating partner and would not own any shares in Thames Water.
“At this stage, Suez’s scope of work is limited to [an] advisory mission to ensure the project’s success and address the specific challenges faced by Thames Water,” said Suez, which confirmed it has an exclusive deal to provide a “non-binding offer to advise and assist Thames Water”.
Other potential bidders include the Hong Kong-based company CK Infrastructure Holdings, which already owns Northumbrian Water and Castle Water, which is co-owned by the Conservative party treasurer, Graham Edwards.
Final offers are due to be submitted in January after the regulator for England and Wales, Ofwat, has agreed the extent to which water companies will be allowed to raise bills. Water suppliers have been lobbying for higher returns for shareholders and the regulator is due to announce its decision on 19 December.
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Thames Water has asked for a 53% increase in bills by 2030. However, Covalis believes its bid would work with a less generous agreement from Ofwat.
Covalis’s bid relies on Thames Water accessing a £3bn emergency loan that will provide the company with instant liquidity and prevent it from running out of cash in the new year.
Existing investors in Thames Water, which include the pension funds Omers and USS, as well as Chinese and Abu Dhabi sovereign wealth funds, have said they believe the business is “uninvestable”.