(Reuters) -U.S. investment group KKR is in talks with troubled British utility Thames Water and its advisers about participating in a 3 billion pounds ($3.88 billion) share sale which forms part of a wider recapitalisation plan, Sky News reported on Saturday.

Both Thames Water and KKR declined to comment.

Thames Water, which serves about 16 million people in and around London, is at the centre of a crisis over sewage dumping, crumbling pipe networks and huge debts.

The utility, Britain’s biggest water supplier, said in October it had lined up a financing lifeline of up to 3 billion pounds with some of its creditors in a deal which if approved will help it survive for another year at least.

KKR is among a small number of investors studying Thames Water’s finances with a view to supporting a rescue share sale, the report said, citing people familiar with the matter.

KKR’s decision hinges on a final determination by water regulator Ofwat which is due by January at the latest, according to the report. It was unclear which of KKR’s funds was participating in the Thames Water equity-raise, Sky News added.

However, one obstacle to KKR buying a big stake in Thames Water may be its 25% holding in Northumbrian Water, the report said.

Under Ofwat’s mergers regime, the Competition and Markets Authority would need to review the deal, although there would not be an automatic prohibition, Sky News said.

The British government has been on standby to place Thames Water into a special administration regime given the risk of a financial collapse.

($1 = 0.7736 pounds)