Chinese investment funds are crowding into an auction for a rubbish-fuelled power plant on the banks of the River Thames that could fetch its owners over £1.5bn.

A major US debt fund, advised by JP Morgan and Credit Suisse, kicked off an auction for the Cory Riverside ­energy-from-waste plant last month, which is understood to have caught the eye of Chinese investors eager to snap up British infrastructure. Hong Kong billionaire Li Ka-shing is expected to show strong interest. His company ­already holds a string of energy and water assets including Northern Power Networks and Northumbrian Water.

Chinese state-backed funds China Everbright Group and Beijing Enterprises are also understood to be ­circling.

UK-focused funds Dalmore Capital, Amber Infrastructure, Equitix and ­Arcus have also been linked to the deal, which could top £1.5bn after a major financial overhaul. The Cory plant is the largest of its kind in the UK and generates power by burning around 750,000 tons of non-recyclable waste every year.

Under long-term contracts with ­local London councils, enormous barges of municipal waste use the ­waterway to ferry the rubbish to the plant, which is on the south side of the river near Thamesmead.

Strategic Value Partners acquired the plant as part of a debt-for-equity deal worth around £850m before gutting its operations and putting in place a new management team led by chairman Jonson Cox, who also chairs the water regulator. Cory Riverside generated pre-tax earnings of £76m last year, but bidders believe that this could rise to £95m following the overhaul, and reach £119m by 2027.

Historically, waste incinerators in the UK have had a poor reputation, but the industry has been cleaned up.

In 2016, almost 10m tons of non­-recyclable waste was used to generate power at 37 energy-from-waste plants in the UK.