(Bloomberg) -- The UK government is continuing to resist stepping in to help Thames Water, despite its rapidly deteriorating financial situation.

The utility needs to find new equity to stabilize its finances. Shareholders say they won’t put in more money and it’s difficult to see why a new investor would want to take on the burden of Thames’s £18 billion ($22.9 billion) debt pile.

On Friday, Thames’s biggest shareholder wrote off the entire value of its stake in the latest sign of trouble for the utility. That comes after a key member of its board stepped down on Thursday and the regulator said it was mulling action against the company for paying millions of pounds in dividends to shareholders last year. 

Thames — which serves about a quarter of the UK population — including London, is at the center of a crisis that is increasingly looking like it will require government help. Pressure is mounting on ministers to take the company into special administration, an effective nationalization.

However, both the government and the regulator Ofwat on Friday insisted Thames could yet find ways to secure new sources of equity. The company needs around £3 billion ($3.8 billion) to fund its turnaround plan to fix chronic leaks and sewage spills as well as protect against growing drought risks caused by climate change.

Thames still had a “wide range of options” to secure new investment, including “the injection of new equity from any prospective investors,” a government spokesperson said, adding that the regulator Ofwat is continuing to work with the utility to boost its financial resilience.

“We prepare for a range of scenarios across our regulated industries, including water, as any responsible government would,” the spokesperson said.

Earlier Friday, Omers Farmoor Singapore Pte, a vehicle of the Ontario Municipal Employees Retirement System, said its 31.7% stake in Thames’ parent company Kemble Water Holdings was valued at £990 million at the end of December 2021. That was cut by 29% last year to £700 million, when the company was first plunged into crisis as steep interest rates caused its debt pile to balloon. By the end of last year, it had cut the value by another 62%. 

That is effectively now worthless. Omers said events this year had led to a “full write down” of its investment, in its annual financial report published Friday. 

How Debt and Sewage Pushed Thames Water to the Brink: QuickTake

Kemble defaulted on its debt last month. Before that, the group of shareholders, including Omers, denounced Thames’s business plan as “uninvestible” and refused to inject any more equity into the company. 

Thames has been bargaining with the regulator to try to get more favorable conditions for its next big spending plan to make it a more appealing prospect for investors. Chief executive Chris Weston has maintained there is still a chance the utility can attract new equity after June 12, when Ofwat is due to make a draft ruling on all water companies’ five year business plans.

An Ofwat spokesperson said Thames should “continue to pursue all options to seek further equity,” adding that the company still had liquidity to run operations until July 2025.

A representative for Omers declined to comment.

--With assistance from Paula Sambo and Joe Mayes.

(Updates with new details throughout)

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