Guy Hands, the prolific City of London investor, was assembling a consortium to splash out on the firm through his private equity firm Terra Firm Capital Partners, it claimed.

Thames, which provides sewage services to 13 million people and drinking water to eight million, is owned by German utility group RWE, which is considering a float of its water assets, including American Water Works.

RWE paid 4.8 billion pounds for Thames in 2000. Thames is Britain's largest water company and the third-largest in the world, employing 12,000 people in 46 countries.

The newspaper stated that South African-born, British university-educated Hands's plans were in the early stages and he may yet decide not to bid.