Thames Water's creditors have signalled they are open to part-government ownership of the struggling utility for the first time in nearly 40 years as they seek to fend off nationalisation under Andy Burnham.
With the incoming prime minister set to push for greater "public control" of the water industry, the company's creditors have said they are willing to accept a deal that could see the British state become a shareholder.
This could potentially take the form of a "golden share" that gives ministers a veto over key decisions, or a conventional equity stake, a source close to the situation said on Sunday.
The creditors are also preparing a revised business plan that will offer more private cash for investment in Thames Water's infrastructure and board engagement with local authorities and MPs in the South East.
No offer of a government stake has been formally tabled by creditors yet, as it was not an option discussed under Sir Keir Starmer's administration. But The Telegraph understands they will say they are open to that possibility, if asked.
The development comes amid reports that Mr Burnham is preparing to put Thames into special administration as one of his first acts in power, a move that some in the City believe could be a precursor to full-blown nationalisation.
An ally of the former mayor of Greater Manchester told The Sunday Times that the taxpayer "needs to receive something in return – that means control" if the Government decides to provide the £2bn that Thames needs to keep going next year.
It is not yet clear whether the new Labour leader is prepared to stomach the steep costs of putting the entire company on the public balance sheet.
Thames's creditors are currently owed £17bn collectively and are expected to defend their interests in court in any scenario where the company is nationalised.
One insider warned that could result in "litigation that dragged on for years".
Alternatively, if the special administration led to a normal sales process, creditors would also be expected to bid for the company alongside rivals.
The creditors are trying to put together a revised turnaround package after criticism from Emma Reynolds, the Environment Secretary. They will promise hundreds of millions of pounds of extra capital spending.
Creditors have already offered to pump at least £20bn into the company up to 2030, including around £10bn in capital spending, funded by £6.5bn in debt and about £3.4bn in equity.
That could potentially open the door for the Government to take equity in Thames Water, potentially through a vehicle such as the National Wealth Fund, sources suggested.
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