A report by the Financial Thames at the weekend says that Thames Water had to pay the due diligence costs of private equity firm KKR for its abandoned financial bid.

On 2 June Thames Water announced that KKR, the investor it named as its preferred partner to enter the Phase 2 diligence stage of the equity raise process, had pulled out of the bid.

Following completion of the due diligence stage, KKR and the senior creditors had prepared detailed plans, including turnaround plans which had been shared with the company.

However, a statement issued to the London Stock Exchange by Thames Water on 2 June said KKR has indicated that it would not be in a position to proceed, and that its preferred partner status had lapsed.

Reacting to the news at the time, Chair of the EFRA Committee, Alistair Carmichael MP, said the Committee had raised serious concerns in May that Thames had only pursued one bidder at an early stage for its takeover bid, against the wishes of Ofwat, and highlighted the risks this could pose if KKR chose not to proceed. “Unfortunately, our concerns have been realised, putting Thames in a perilous position,” Alistair Carmichael said.

He went on to warn that the government should ensure that any takeover was in the public interest and did not “line the pockets of financial institutions further to the detriment of customers and operational performance”.

The FT article says that KKR’s due diligence costs had reached £20 million “according to people familiar with the situation”, which were “largely due to fees paid to KKR’s advisers.”

According to the FT, the fees “will raise concerns that cash is leaking out of the utility.”