Thames Water could be in safe Hands

The share price of RWE AG - the German utility group - has risen sharply this week amid rumours that Guy Hands is planning to buy Thames Water for approximately £8 billion.

RWE AG announced it would be selling off its global water assets in November 2005 to focus on its gas and electricity businesses. The company admitted that "the notion of being a global water player did not prove worthwhile in practice" as economies of scale and synergistic effects could not be achieved globally.

Now, Terra Firma Capital, Guy Hands' investment vehicle, is reported to be putting a consortium of investors together expected to table a bid for Thames Water, Britain's biggest water company and the third largest in the world.

This would not be the dealmaker's first foray into the water business if he does bid. Mr Hands previously bought Sutton and East Surrey Water which he sold to Deutsche Bank for £189 million. Terra Firma also owns the Waste Recycling Group which it bought in 2003, transforming it from a landfill operator to the largest waste to energy company in Europe.

RWE paid £4.8 billion for Thames water in 2000 so would make a sizeable profit if the £8 billion bid rumours are true. Goldman Sachs, the bank covering the sale, is expected to begin sending out financial information during the next few weeks.

By David Hopkins



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