Creditors want Thames Water to be given immunity from prosecution over pollution

Lenders vying to take over Thames Water have demanded the company and its management be granted immunity from prosecution for serious environmental crimes as a condition of acquiring it, the Guardian can reveal.

- John Collingridge Anna Isaac

Creditors want the environment secretary, Steve Reed, to grant the water company extraordinary clemency from strict rules covering everything from sewage spills to failure to upgrade its treatment works.

The demands, if successful, would render the Environment Agency (EA) largely powerless to take enforcement action against Britain's biggest water company for some of the most serious criminal breaches of its licences and permits.

Thames Water has been a serial offender in recent years, paying tens of millions of pounds in fines and penalties, with multiple convictions for dumping raw sewage into rivers and streams with dozens more investigations under way.

The fate of the heavily indebted utility was thrown into further doubt last week when the US private equity firm KKR quit an auction to buy it citing concerns about politicisation and the poor state of its assets.

That has left a disparate band of about 100 bondholders, who have collectively lent the company about £13bn, as the sole bidder. If the creditors' bid fails, Thames Water is likely to fall into state ownership via the special administration regime - a fate the Treasury is desperate to avoid.

Sources described the creditors' list of demands as a "ransom note" that underlined their powerful negotiating position as the "last show in town".