The UK’s largest water company was trying to strike a deal with the watchdog Ofwat that would give it permission to charge customers more to avoid having to be taken over by court-appointed special administrators, the Financial Times reported.
That plan would give Thames Water permission to increase bills by 40% by 2030, while also offering more leniency around regulator fines and rules around the dividends it can pay to shareholders.
According to the FT, officials at Defra have in place contingency plans for Thames Water if it collapses, under the name Project Timber.
However, new rules introduced by the government last year can take enforcement action against water companies issuing dividends if they are performing badly against financial and environmental targets.
Thames Water has said investors will not take any money out of the business until the turnaround is completed but the rules do not distinguish between internal and external dividends.
Thames Water revealed this month that it expected more leaks than initially thought, after its ageing pipes were overwhelmed by heavy rain this winter.
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