Thames Water will pay fines amounting to more than £120million via a payment plan as the debt riddled utility and its creditors scramble to avoid its nationalisation and collapse.

The embattled water group, which currently sits on a £16.8billion debt pile, was earlier this year issued with separate fines related to its wastewater business and the payment of unjustified dividends to shareholders.

Pollution and shareholder handouts have been keen drivers of public frustration and political pressure on water firms, as households across the country continue to shoulder higher bills to pay for essential infrastructure upgrades. 

Thames had been required to pay the penalties, amounting to £104.5million and £18.2million respectively, by 20 August 2025.

But industry watchdog Ofwat said on Wednesday it had agreed to Thames' requests to utilise a payment plan.

Thames has previously urged leniency over fines and pollution targets, with the group potentially facing £1.4billion in levies over the next five years.

It comes as Thames' largest group of creditors holds talks with Ofwat over a rescue plan that would see lenders inject £5billion of new capital.

However, Thames' creditors warned it has a 'very short and closing window' to ensure its survival as a private business.

Environment secretary Steve Reed has reportedly lined up FTI Consulting to advise on contingency plans which would involve Thames Water being placed into a special administration regime.

The new Ofwat payment plan will see 20 per cent of the two total penalties, or £24.5million, paid no later than 30 September.

The remaining bulk of the penalties must be paid within 30 calendar days after the implementation of a restructuring of Thames' finances, 'such that there is improved cash liquidity in the business', Ofwat said.

Alternatively, if Thames does enter special administration under the Water Industry Act 1991, the fine must be paid within 30 days of exiting this state.

Ofwat has also implemented a 'backstop date' of 31 March 2030.

The regulator's senior director of enforcement Lynn Parker said: 'This payment plan continues to hold Thames Water to account for their failures but also recognises the ongoing equity raise and recapitalisation process.

'Our focus remains on ensuring that the company takes the right steps to deliver a turnaround in its operational performance and strengthen its financial resilience to the benefit of customers.'

Thames said in a statement that the fines 'will not be funded by customer bills'.

It added: 'The company continues to work closely with stakeholders to secure a market-led recapitalisation which delivers for customers and the environment as soon as practicable.'