RWE, the former owner of Thames Water, has dampened hopes of a spending spree in the UK utilities sector with claims of an “overheated” acquisitions market.

Harry Roels, the chief executive of RWE, said that the German energy group would continue to make selective acquisitions but gave warning of limited opportunities.

“The overheated acquisitions market . . . with exceptionally high company valuations, offers very few attractive opportunities for sound external growth,” he said.

His comments came just months after the group sealed the £8 billion sale of its Thames Water unit, which supplies London households, to a Macquarie-backed consortium.

The sale, completed late last year, came amid a flurry of interest from investors in owning key infrastructure assets. Macquarie, the Australian bank, has been at the forefront of the rising interest in investing in infrastructure assets including utilities, roads and airports.

The growing attraction has been encouraged by relatively low interest rates, which have allowed new owners to borrow against the value of relatively stable and visible future revenues to run more efficient balance sheets.

Speculation over consolidation in the UK utilities sector has frequently cited RWE, which also owns nPower, the energy supplier, as a probable buyer.

Earlier this week, the company was linked to a possible takeover approach for Scottish & Southern Energy (SSE), frequently touted as a probable bid target. However, Mr Roels said yesterday that RWE was not interested.

RWE has also been at the centre of takeover speculation itself, with Gazprom, the Russian gas group, seen as a possible predator. The sale of Thames Water was perceived by some analysts to make the German group a more attractive proposition to a buyer.

German reports suggested that RWE has already conducted a beauty contest of banks to prepare a defence team ready to act in the event of an approach.

Mr Roels said that despite his concerns, the group might still make “selective acquisitions”, with Eastern Europe, already a significant operating hub for RWE, seen as a key area for growth.

The sale of Thames Water resulted in a €700 million (£470 million) net gain, leaving the group with a positive cash balance and giving it the flexibility to do significant deals.

He said that the company was seeking to tap into privati-sation programmes as they emerged in countries including Croatia, Hungary, Poland and Romania. RWE was also trying to enter the market through power plant projects.

The company has €25 billion to spend on expanding its business, including new power plants and modernising its electricity and gas networks.

Earlier this week, RWE announced that Juergen Grossmann would succeed Mr Roels.

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