Thames Water - comment

We like how the Covalis bid could work with lower price hikes “so long as concessions could be reached on fines and the pace of capital investment in the business”. Somehow we thought those fines and CapEx requirements were the reason for the situation in the first place. Suez, keeping a safe distance behind Covalis, are actually going further than we’d have imagined by effectively promising to take over the operations. £1bn may be regarded as option value on top of the debt pile, but it’s still a lot of cash. We are wondering about the list of CPs and the reps and warranties under those bids. Meanwhile, plan A remains the A-Proposal, plan B remains the B-Proposal and we think that for now there is no feasible way to make any equity bid work without at least a first restructuring.