French expertise could be brought in to manage London’s water system as part of a £5bn rescue proposal for struggling Thames Water.
The bid, led by Covalis Capital, includes plans to enlist French water company Suez to operate Thames Water, which serves 16 million people across London and the South-East. Covalis, with offices in London, New York, and the Cayman Islands, has proposed an initial £1bn injection, supplemented by £4bn raised through asset sales. These assets, potentially including reservoirs, land, and buildings, would then be leased back for operational use.
Under the proposal, Covalis—headed by New Yorker Zach Mecelis—would not take ownership of Thames shares but would bring in Suez as an operating partner. Suez, which employs 5,000 people in the UK, would manage Thames Water’s assets, support a potential breakup of the company, and oversee regional spin-offs, such as the Thames Valley. Any remaining parts of Thames Water could then be floated on the stock market.
Suez has confirmed its “exclusive partnership” with Covalis, emphasizing its role in providing technical and organizational expertise to assist Thames Water. A Suez spokesperson stated:
“At this stage, Suez’s scope is limited to advisory support to ensure the project’s success and address the specific challenges facing Thames Water.”
The rescue bid follows a rejection by Ofwat, the industry regulator, of Thames Water’s earlier proposal to raise customer bills by 53% over five years to address its £19bn debt burden, much of which accumulated under previous owner Macquarie, an Australian investment group.
Covalis, a hedge fund with infrastructure investments across Europe, including German energy giant RWE, has tied its bid to Ofwat’s approval of smaller bill increases. These hikes would be less aggressive than Thames Water’s initial request but would also involve significantly reduced investment levels.
Ofwat is expected to deliver its final decision on Thames Water’s five-year business plan, including proposed bill increases and investment strategies, on December 19.
Thames Water has faced ongoing financial turmoil for years. Originally privatized under Margaret Thatcher in 1989 with no debt, the company now owes an estimated £19bn.
Much of this debt accumulated during the ownership of Macquarie, an Australian infrastructure bank, which left Thames with liabilities exceeding £10bn by the time it sold the company in 2017. Since then, additional interest payments have exacerbated the financial strain.
While Macquarie has claimed to have invested billions into upgrading Thames’s infrastructure, critics argue it extracted substantial funds through loans and dividends, leaving the company vulnerable.
Both Covalis and Thames Water declined to comment on recent developments.
Gary Carter of the GMB union, which represents many water industry workers, voiced strong concerns about the future of Thames, warning against “vulture” takeovers.
He said, “Any plan to break up Thames would be a disaster for consumers and workers. These bids won’t fix leaks or stop pollution—they’ll simply enrich bankers. Thames’s reservoirs and land provide vital leisure facilities for millions of Londoners, including walking, fishing, and sailing. This sale risks putting those assets at the mercy of commercial exploitation.”
Other potential bidders include Hong Kong’s CK Infrastructure Holdings, which owns Northumbrian Water, and Castle Water, co-owned by Conservative Party treasurer Graham Edwards. Castle Water, based in Scotland, is reportedly planning to take a majority stake in Thames and eventually list it on the stock exchange. Castle previously acquired Thames Water’s non-household division in 2017 and now serves hundreds of thousands of businesses, charities, and public-sector organizations.
