HONG KONG’s largest quoted infrastructure investor is drawing up an £8 billion bid for Thames Water, Britain’s biggest water company.

Cheung Kong Infrastructure Holdings (CKI), which is majority-owned by Hutchison Whampoa, the Hong Kong-based conglomerate, has held talks with investment banks and potential co-investors in the past week about an offer for Thames Water.

CKI is understood to have held talks with Borealis, the Canadian pension fund, about joining forces on a bid for Thames, which is owned by the German utility group RWE.

The move comes ahead of a likely auction of Thames by RWE and its adviser, Goldman Sachs. RWE has said it will pursue a sale or demerger of its water assets, and analysts expect the company to use the proceeds to make a big acquisition in the European gas and electricity market, possibly including Centrica, the owner of British Gas.

Terra Firma, the buyout firm run by City financier Guy Hands, is among the British companies interested in Thames, though it is thought that a formal consortium will not be formed for several months. Macquarie, the Australian bank that owns South Eastern Water, is also viewed as a potential bidder.

CKI is one of the biggest investors in China’s infrastructure sector, with subsidiaries and associated companies that include Green Island Cement, Hong Kong’s only integrated cement producer, and Hongkong Electric, one of Hong Kong’s two power producers and distributors. In Britain, CKI owns Cambridge Water, which it acquired nearly two years ago, and holds a 40% stake in the North England Gas Distribution Network (NEG). CKI could not be reached for comment this weekend.

Water-industry sources suggest that Ofwat, the regulator, has expressed its opposition to a highly leveraged buyout of Thames Water because of the financial burden it could place on the company. But Ofwat declined to comment on this suggestion.

A number of other British water assets are also on the market, including a 25% stake in Southern Water, owned by the French company Veolia Environnement.

Royal Bank of Scotland, which owns the remaining 75%, is seen as the most obvious buyer of the French-owned stake.

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