UK government should reject creditor bid for Thames Water, says lawmaker committee

LONDON, Sept 18 (Reuters) - The British government should reject a creditor bid for Thames Water and put the embattled utility into temporary public ownership, a committee of lawmakers said on Friday, just months before the group runs out of cash.

• The Environment, Food and Rural Affairs Committee (EFRA) is a cross-party group of lawmakers which can investigate and scrutinise government policy but whose conclusions are not binding.

• A group of Thames Water senior creditors in July said they were working on an improved rescue deal which could include a 'golden share' for the government, to try to convince the government to accept their bid for the water company.

• Prime Minister Andy Burnham has said nationalisation is the best solution for Thames Water, but that could leave the cash-strapped government facing a multi-billion-pound bill.

• Thames Water, which has 16 million customers and is the UK's biggest water company, has about £20 billion in debt. It is blamed for polluting rivers with sewage and has been fined heavily for its poor environmental record.

• "We do not believe this opaque consortium of 100 hedge funds and others has the interests of the public, the company or the environment at heart," said EFRA Committee Chair Alistair Carmichael of the group of creditors.

• The EFRA committee said legislation should be changed to allow the government to bring Thames Water into its Special Administration Regime, a form of temporary nationalisation.

• Any financial liabilities faced by the government could be recouped if the company is turned around and then sold on, the committee said.

• Changes should be made to regulation to avoid the "doom-loop" which has exacerbated Thames Water's problems whereby it is fined for poor performance but then has less money to invest, the committee said.

• Thames Water said in a statement that it needs to be recapitalised and put on a firm financial footing so it can continue investing.

• A London & Valley Water creditor consortium spokesperson said the enhanced proposal was the fastest route to fix Thames Water's complex problems.

(Reporting by Sarah Young; Editing by Elaine Hardcastle)