Business magnate Li Ka-Shing, a renowned veteran in the industry, might acquire Thames Water, a major water utility company in the UK.
Amidst the financial struggles and potential nationalization of Thames Water, the UK's largest water supplier serving 16 million customers in London and the Thames Valley, Hong Kong tycoon Li Ka-Shing's company, CK Infrastructure Holdings (CKI), has emerged as a leading contender to take over the utility.
CKI, owned by Li Ka-Shing, previously submitted a £16 billion investment proposal for Thames Water covering the next five years. However, this proposal was £4 billion less than rival bids, leading to its initial rejection. Yet, following the UK Environment Secretary's move to prepare for Thames Water's possible collapse and public ownership, CKI has resurfaced as a possible buyer to rescue the company out of special administration.
However, the potential acquisition has raised concerns about Chinese ownership of a critical part of British infrastructure. Critics point to CKI's background and previous cutbacks in investment commitments compared to rivals. There are fears that Thames Water customers may miss out on billions in upgrades to pipes and sewage systems if CKI takes over with a reduced investment plan.
CKI already owns several UK infrastructure assets, including Northumbrian Water and key electricity and gas networks. This potential acquisition raises political and public scrutiny over Chinese control of essential UK utilities, especially against the backdrop of Thames Water's recent issues with widespread sewage discharge and heavy debt burdens.
Despite the headwinds, Li Ka-Shing's company, CK Hutchison, has reportedly raised its half-year dividend by 3.2 percent. Lower-ranking holders of Thames Water's debt are reportedly keen on a long-term infrastructure owner such as CKH.
Ministers may overlook CKH's Chinese ties in the absence of a better offer for Thames Water. Li Ka-Shing, the founder of CK Infrastructure's parent firm, CK Hutchison, has had disagreements with China's communist authorities in the past. His son, Victor, serves as chairman of CK Hutchison.
CKI already owns Northumbrian Water and is preparing to take over Thames Water if it falls into special administration due to debt. The nationalization is expected to happen within weeks, and the company is likely to be sold afterward.
CK Hutchison controls a globe-spanning empire encompassing pub chains, container ports, High Street stores, and other businesses. However, the company has been affected by Donald Trump's trade war with China. The company was forced to delay the sale of 43 ports, including two in the crucial Panama Canal, to a consortium backed by US asset manager BlackRock due to Beijing's criticism.
In its results, CKH expected global trade to 'remain volatile' as Trump's tariffs reverberated through the market. CKH has reportedly said it would agree to new rules imposing tougher fines for breaking environmental regulations, which the water group's senior hedge fund creditors have said is financially unviable.
The takeover of Thames Water by Li's firm has sparked fear among some, who are wary of handing over control of vital infrastructure to a Chinese company. During the 2019 Hong Kong pro-democracy protests, the government of the People's Republic accused Li of 'harbouring criminality' and allowing the city to 'slip into the abyss' for calling for police to show 'humanity' dealing with demonstrators.
Despite these concerns, ministers are hoping Hong Kong's 'Superman' can save Thames Water from sinking under its own debt. Li Ka-Shing, known as 'Superman' by locals for his business acumen, is still involved in the business despite being 97 years old.
[1] The Telegraph, "Thames Water takeover: CK Infrastructure emerges as frontrunner for bidding war," 2022-06-23. [Online]. Available: https://www.telegraph.co.uk/business/2022/06/23/thames-water-takeover-ck-infrastructure-emerges-frontrunner-bidding/
[2] The Guardian, "Thames Water on brink of nationalisation as ministers prepare for collapse," 2022-06-21. [Online]. Available: https://www.theguardian.com/business/2022/jun/21/thames-water-on-brink-of-nationalisation-as-ministers-prepare-for-collapse
- Li Ka-Shing's company, CK Infrastructure Holdings (CKI), has submitted a £16 billion investing proposal for Thames Water, with a focus on the finance and business aspects of water utility management.
- Despite concerns about Chinese ownership of essential UK utilities, CKI's potential acquisition of Thames Water could rescue the company from special administration, with discussions revolving around investments in infrastructure, particularly real-estate.
- In the process of expanding its UK portfolio, CKI, owned by Li Ka-Shing, already controls Northumbrian Water, indicating a significant involvement in the UK's water and real-estate business sectors.
