Thames Water could be on the verge of being renationalised after its preferred funding partner, US private equity giant KKR, has decided to walk away.
KKR was selected as "preferred partner" in March after it offered to put £4 billion into the company, but despite the US firm completing due diligence stage and preparing a funding plan, it has now "indicated that it will not be in a position to proceed", the UK's largest water company said in a statement.
As the preferred partner status has now lapsed, the company will resume talks with the regulator, Ofwat, and its other bondholders.
Thames Water chairman Sir Adrian Montague said: "Whilst today's news is disappointing, 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 goal.
"The company will therefore progress discussions on the senior creditors' plan with Ofwat and other stakeholders."
Last month, KKR was reported by Bloomberg to be looking at a material write-down of around £8 billion of Thames Water’s debt.
After winning court approval for an emergency £3 billion loan and receiving five other rival approaches, mostly from existing bondholders, Thames said in March that it hoped to agree terms with KKR for a share sale by the end of June, enabling it to raise rescue funds by the end of the year.