Thames Water: UK lines up administrator for debt-riddled water firm in case of collapse

Sky News has exclusively revealed that Steve Reed, the environment secretary, has signed off the appointment of FTI Consulting to advise on contingency plans for Thames Water to be placed into a Special Administration regime (SAR). Sources said on Tuesday that the advisory role established FTI Consulting as the frontrunner to act as the company's administrator if it fails to secure a private sector bailout.

However, the approval of such an appointment would be decided in court. Thames Water, its largest group of creditors and Ofwat, the industry regulator, have been locked in talks for months about a deal that would see its lenders injecting about £5bn of new capital and writing off roughly £12bn of value across its capital structure.

The discussions are said to be progressing constructively, although they appear to rely in part on the prospect of the company being granted forbearance on hundreds of millions of pounds of regulatory fines. Insiders stressed that FTI Consulting's engagement by the Department for the Environment, Food and Rural Affairs (DEFRA) did not signal that Thames Water was about to collapse into insolvency proceedings.

A SAR would ensure that customers would continue to receive water and sewage services if Thames Water collapsed, while putting taxpayers on the hook for billions of pounds in bailout costs. Thames Water, which has about 16m customers, serves about a quarter of the UK's population.

It is drowning under close to £20bn of debt, and was previously owned by Macquarie, the Australian infrastructure and banking behemoth.