In The Waterworks

Olly Haynes writes:

Thames Water’s preferred investor KKR, previously signed a deal to manage the US municipal water company of Bayonne New Jersey which “sent bills soaring” and has been described by residents of the city as “drowning us”.

On Monday Thames Water, the UK’s biggest water supplier, which has been struggling under mounting debt, announced the American private equity firm KKR as its preferred buyer in a bid to prevent nationalisation. KKR is expected to acquire a stake of around £4 billion in Thames Water.

While KKR has some experience managing water companies, both in the UK and the US, the company has not always left customers happy.

In 2012, the New Jersey city of Bayonne signed a deal with KKR and Suez to manage their municipal water system which was in dire need of repairs to its crumbling infrastructure.

In 2016, the New York Times reported that “those crusty brown pipes have been replaced by shiny cobalt-blue ones” but this came “with a hefty price tag — not just to pay for new pipes, but also to help the investors earn a nice return”.

The deal the financially desperate city signed with KKR and Suez guaranteed the company a return of over half a billion dollars over 40 years. However, water rates rose 28% between the signing of the deal in 2012 and 2016 and continued to rise afterwards. The deal promised residents a four year freeze on water rates, which never materialised because of the revenue guarantee.

KKR sold its share in Bayonne’s water company to Argo in 2018, making a return of 2.8 times the amount invested, though the deal signed alongside Suez remains in place.

The company also has a record of overseeing price rises, and allegations of sewage dumping in the UK.

At Prime Minister’s Question Time on Wednesday Liberal Democrat leader Ed Davey criticised Kier Starmer’s refusal to bring Thames Water into special administration by while raising KKR’s previous investment in Northumbrian Water.

He said “three years ago the American private equity firm KKR bought a 25% stake in Northumbrian Water, since then people across the North East have seen their water bills soar, while last year alone Northumbrian Water has dumped nearly one million tonnes of raw sewage in to Durham’s Whitburn coast conservation area”.

Davey asked if Starmer would guarantee that Thames Water would not be allowed “to pull the same trick of raising bills and dumping raw sewage at the same time”.

Matthew Topham of the campaign group We Own It told Byline Times “KKR inspired a book and film called Barbarians at the Gate precisely because of its rampant profiteering and financial abuse of service users so we know that it is completely ill suited to delivering a public service that works in the interests of its users and the environment”.

KKR claims to have moved beyond its asset stripping past. In a 2019 Forbes article titled “Gentleman at the Gate” Henry Kravis one of the co-founders stated “You can’t buy a company and strip out all the costs. It’s not a sustainable business model […] “If you’re not putting money back in to come up with new products, new plants and new ways of doing business in new geographies, you’ll die eventually”.

In July last year KKR bought FibreCop from Telecom Italia, the major Italian telecoms network. In September 2024, Fibrecop announced that they were cutting 1300 jobs through a voluntary redundancy scheme.

In January the CEO of Fibrecop Luigi Ferraris quit the company with no explanation given by Fibrecop following a “tense” board meeting in which the CFO disclosed that 2025 pre-tax earnings would be €449m lower than initially forecasted in KKR’s original business plan.

The financial situation of Fibrecop under KKR’s tenure has Italian trade unions worried. Daniele Carchidi of SCL CGIL, the Italian communication workers union told Byline Times that Ferraris quit due “to a contrast in perspectives with KKR” and that when KKR bought the company it “was expected to result in a series of investments in new technologies and widespread coverage of fibre optics and therefore a three year postponement for the first dividends, but apparently KKR has no intention of waiting three years for profit distribution”.

He added that among the unions “the concern is starting to increase, considering the reasons for the CEO’s resignation and the rumours of redundancies”.

Topham told Byline Times that references to “Gentleman at the Gate” and a changed KKR were “just boilerplate stuff that they put on over the same model. It has literally not changed for 40 years. Because of how the legal corporation is structured, because of how the regulatory system is structured, they just have to prioritise returns to shareholders and to capital more widely over the interests of service users”.

Byline Times asked Thames Water if KKR had given them assurances about job cuts and proposed a deal that would be fair to the consumer. Thames Water suggested Byline Times direct those questions towards KKR. KKR in turn did not respond to a request for comment.

Asked if they thought KKR was an appropriate buyer, a UK Government spokesperson said, “The company remains stable and the government is closely monitoring the situation. It would be inappropriate to comment further on the financial matters of a private company.”

But Sandra Laville writes:

A group of anglers trying to restore the ecosystem of a river have seen off a challenge by the environment secretary, Steve Reed, who claimed that cleaning up the waterway was administratively unworkable.

Reed pursued an appeal against a group of anglers from North Yorkshire, who had won a legal case arguing that the government and the Environment Agency’s plans to clean up the Upper Costa Beck, a former trout stream devastated by sewage pollution and runoff, were so vague they were ineffectual.

The environment secretary decided, after Labour won the election last year, to continue the challenge, which had begun under the previous Conservative government.

On Wednesday, the appeal court found in favour of the anglers, the Pickering Fishery Association.

The judges dismissed Reed’s argument that it was administratively unworkable to develop specific measures to clean up individual rivers, lakes and streams as is required by law under the water framework directive – legislation that aims to improve the quality of rivers, lakes and coastal waters.

Andrew Kelton, a solicitor from Fish Legal, which represented the anglers, said: “This case goes to the heart of why the government has failed to make progress towards improving the health of rivers and lakes in England.

“Only 16% of waterbodies – 14% of rivers – are currently achieving ‘good ecological status’, with no improvement for at least a decade, which comes as no surprise to us having seen how the Environment Agency at first proposed, but then for some reason failed to follow through with, the tough action needed against polluters in this case.”

He said the Upper Costa Beck was just one of 4,929 waterbodies, but was a case study in regulatory inaction in the face of evidence of declining river health.

The Costa Beck has failed to achieve good ecological status under the water framework directive regulations partly because of sewage pollution and runoff from farms.

The anglers, who have spent more than 10 years trying to get the authorities to clean up the river, took the government and the EA to court in an attempt to force action. They successfully argued that the plan by the Department for Environment, Food and Rural Affairs (Defra) and the EA to improve the stream lacked the legally required measures necessary to restore it – for example, it did not include the tightening of discharge permits for sewage treatment works.

The judge in the high court found that the government had unlawfully failed to assess and identify specific measures to achieve the legally mandatory targets for the waterbody. That ruling was on Wednesday upheld by the appeal court.

Penelope Gane, the head of practice at Fish Legal, said Reed could show a real commitment to restoring rivers and lakes. “What we need is meaningful action to clean up rivers,” she said. “Anything short of that will be a tacit admission that the government has abandoned its environmental ambitions for water.”

Defra has been approached for comment.