Thames Water’s lenders have unveiled a £10bn rescue plan that would involve paying hundreds of millions of pounds worth of fines imposed on the troubled water company for leaks and pollution, as part of an effort to avoid financial collapse.
A group of private equity firms and investment groups said they would inject around £3.35 billion in cash into Thames Water and raise £6.65 billion in debt, in exchange for the company not falling into government-controlled administration – effectively a temporary nationalisation.
Bills for Thames Water’s 16 million customers in south-east England are already set to rise sharply until 2030, but the bailout plan would at least keep them at that level rather than raising them further.
Britain’s biggest water company has been on the brink of collapse for more than two years as it struggles under the weight of a £17.6bn debt built up over decades since privatisation. It has been effectively in the hands of its lenders, which include US hedge funds Elliott Management and Silver Point Capital, since shareholders exited in 2024.
The supplier has been hit by poor environmental performance over the same period, with wastewater leaks sparking public and political outrage and adding huge costs in the form of fines.
Last year, The Guardian revealed that business owners were asking to be saved billions of pounds in costs and fines to try to attract new investors.
On Monday, its lenders said the new bailout plan would involve paying all existing fines in full and making an upfront payment to cover future poor performance against Ofwat targets. The company would remain subject to future fines for pollution and leaks from Ofwat and the Environment Agency.
The plan must be approved by Ofwat and the company’s board, but would mean around 30% of Thames’ existing debts to its major creditors would be wiped out in exchange for continuing to operate as a private company. Its smaller group of “class B” junior creditors would be completely eliminated.
The plan would also mean Thames Water would not pay dividends to its investors until at least 2035. Last year, the company was fined £18 million for breaching dividend rules, for paying cash to investors despite failing to deliver on its services to customers and its environmental record.
The consortium also said customers would receive a share of the profits if it sells Thames Water for a significant profit.
Last year Thames Water, which employs around 8,000 people, was rated England’s worst water company by the Environment Agency, after sewage pollution hit a new peak.
The pollution scandal has been thrust back into the spotlight in recent weeks after Channel 4 drama Dirty Business told the story of how private companies have been allowed to pollute Britain’s rivers and waterways.
Thames Water was nearly placed under temporary government control in 2025 when it was forced to obtain court approval for high-interest loans worth £3bn. Since then, he has been working on a second deal to reorganize the rest of his debts and pass formal ownership to his lenders.
But talks have dragged on for months, and Thames has survived by gradually tapping into £3bn of emergency funding. In addition to US hedge funds, the group of lenders also includes more traditional investors such as Aberdeen and Insight Investment.
The rescue package will also need approval from Emma Reynolds, the Environment Secretary, as well as other regulators including the Drinking Water Inspectorate and the Environment Agency.
A spokesman for the consortium of lenders, known as London & Valley Water (L&VW), said the plan emerged after “constructive discussion and detailed feedback from regulators”.
They said the plan was designed to “establish a path back to full compliance as quickly as possible” and would give a “clear responsibility” to reduce wastewater spills.
The rescue deal is the latest attempt to avoid being placed into special administration, a form of temporary nationalization, after a previous takeover attempt by US private equity firm KKR failed last June.
Thames Water said there is “no certainty” the plan will be accepted. “At this stage, no decision has been made by the company’s board of directors, Ofwat, other relevant regulators and investment committees to accept and take forward L&VW’s proposal for implementation,” the company said.
An Ofwat spokesperson said: “We continue to engage with L&VW and are reviewing their plans carefully to assess whether they deliver a turnaround in the company’s operational performance and strengthen its financial resilience for the benefit of customers and the environment.”
