Thames Water’s future is in doubt after a US private equity giant abandoned a £4billion rescue plan.
KKR walked away from the investment deal, partly due to growing concerns over political interference from the Labour Government.
The decision is a major setback for the debt-riddled utility firm’s scramble to avoid nationalisation.
Environment Secretary Steve Reed said the Government was ‘keeping a close eye’ on the situation and is ready for ‘any eventuality’, which could include a taxpayer-funded bailout.
But Thames Water – which is struggling under £20billion of debt – refused to confirm whether it would scrap executive bonuses despite the fresh financial hurdles.
Only last week, industry regulator Ofwat fined the firm a record £123million for sewage spills and paying ‘undeserved’ dividends to shareholders.

Outrage: Thames Water – which is struggling under the weight of £20bn of debt – refused to confirm whether it would scrap executive bonuses despite the fresh financial hurdles
New York-based KKR had been chosen as the UK’s biggest water supplier’s so-called preferred partner in March.
Bosses last year launched a search for a buyer after its former owners, including pension and sovereign wealth funds, said the company was ‘uninvestable’ – plunging the debt-laden firm into crisis.
But after completing due diligence checks, KKR said it ‘will not be in a position to proceed’ with the takeover. The buyout firm was worried about potential future policy changes that could impact the running of the company.
Tough government rhetoric over the water industry also spooked the firm, reports said.
Thames Water yesterday stated it will hold talks with Ofwat and other stakeholders over a backup turnaround plan devised by its senior creditors. Chairman Sir Adrian Montague said KKR’s decision was ‘disappointing’.
He added: ‘We continue to believe that a sustainable recapitalisation of the company is in the best interests of all stakeholders and continue to work with our creditors and stakeholders to achieve that.’
However, it fuelled fears that the Government may be forced to take control of Thames Water, which serves 16m households in London and the South East. Reed told LBC Radio yesterday that ‘Thames itself remains stable’.
But MPs on the Environment Select Committee, which last month grilled the utility’s bosses over plans to pay themselves huge bonuses, sounded the alarm over the future of Thames Water.
Chairman Alistair Carmichael said: ‘In May we raised concerns that Thames had only pursued one bidder at an early stage for its takeover bid, against the wishes of Ofwat, and highlighted the risks this could pose if KKR chose not to proceed. Unfortunately our concerns have been realised, putting Thames in a perilous position.’
A company spokesman refused to confirm whether the payout proposals would be scrapped entirely after the KKR deal collapsed.
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