Thames Water serves about a quarter of the UK’s population, mostly across London and parts of southern England, and employs 8,000 people.
The government has previously said it is ready to take over Thames Water in the event that it cannot continue to operate, but earlier this year the company secured a £3bn rescue loan to avert this possibility.
Regardless of who owns the company, its water services will continue as normal.
Thames said recently that it had received approaches from six firms about taking a stake in the business.
It will now enter the next stage of the investment process with KKR, one of the world’s largest private equity firms with $160bn of investments globally. KKR is already a shareholder in another UK water provider, Northumbrian Water.
Thames did not say how much KKR planned to invest, but said the proposal would lead to a “material impairment” for some creditors, meaning a write-off of some of the debt and interest Thames Water owes.
Thames added there was no certainty that a binding proposal would emerge, and it would require regulatory approval.
“The company remains focused on putting Thames Water on a more stable financial foundation, implementing its turnaround plan and delivering a market-led solution that is in the best interests of customers, UK taxpayers and the wider economy,” it said.
When Thames was privatised in 1989, it had no debt. But over the years it borrowed heavily and now has debts of about £19bn.
Its debt pile increased sharply when it was owned by Macquarie, an Australian infrastructure bank.
Macquarie has said that it invested billions of pounds in upgrading Thames’s water and sewerage infrastructure while it owned the company.
But critics argue that it took billions of pounds out of the company in loans and dividends.
Along with many UK water firms, Thames Water has been in the spotlight for pumping sewage into rivers.
Between 2020 and the end of last year, it discharged at least 72 billion litres of sewage into the Thames.