Thames Water asks Ofwat for leniency on costs and fines as it tries to attract buyers

Thames Water is asking to be spared billions of pounds of costs and fines over the next five years and heap more on to bills so it can attract new investors, the Guardian can reveal.

- John Collingridge Anna Isaac

The struggling water company is racing to find a buyer over the next eight weeks and is trying to persuade the regulator Ofwat to grant it significant leniency on penalties and extra costs, to attract bidders. That would mean customer bills rising by far more than the 35% it has been allowed.

Thames and a clutch of hedge funds lending it £3bn of high-interest debt have said new investors will walk away unless Ofwat grants huge allowances on costs. The company has claimed that otherwise their investment would be "pissed away" on fines and costs by the end of the decade, leaving it in the same parlous financial position, sources said.

Thames is also trying to interfere with regulators handling its legal challenge over customer bills, and has met Ofwat and the Competition and Markets Authority (CMA) in recent days to try to persuade them to slow down their work on it to avoid spooking investors, the Guardian can reveal.

The revelations underline the high-stakes negotiations to avert the collapse of Britain's largest water company, with Labour desperate for a private sector solution to avoid the biggest unravelling of a Thatcher privatisation. Thames, which has 16 million customers and 8,000 employees across London and the Thames valley, has been on the verge of collapse for months, hollowed out by years of dividend extraction, fines and huge borrowings that have left it owing more than £19bn.