Thames Water, the company that provides drinking water and sewage treatment services to around a quarter of the United Kingdom's 68.5 million people, has been fined a record 122.7 million pounds ($165.7 million) for breaking rules in relation to its sewage system and for breaching regulations around payments to shareholders.

The company, which mainly serves people living in and around the UK capital was penalized by the industry regulator, Ofwat, which said it took action after conducting its "biggest and most complex investigation" ever.

The fine was the largest Ofwat had ever issued.

The regulator also stipulated that the fine must be "paid by the company and its investors, not by customers", sending a clear message to the enterprise not to simply push up its prices to pay the penalty.

Experts believe the fine could push Thames Water into bankruptcy because the company, which employs 8,000 people, has a long history of falling revenues and rising costs that has made its business model almost impossible to sustain. The company also has debts of 20 billion pounds and took on an additional 3-billion-pound loan in March to prevent a looming bankruptcy.

The record fine levied on Wednesday was mainly aimed at breaches of rules connected to Thames Water's sewage operations but also included an 18.2-million-pound penalty for breaches of the rules around "undeserved" shareholder payouts, or dividends, that the regulator said did "not properly reflect the company's delivery performance for customers and the environment".

Thames Water is not the only UK water and sewage company in difficulty. Several are similarly weighed down by large debts as they try to upgrade aging infrastructure. As a result, bills paid by households for their services rose by 10 pounds a month, on average, in England and Wales in recent weeks.

Thames Water customers now pay an average of 639 pounds a year for drinkable tap water and sewage processing, up from 488 pounds last year.

David Black, Ofwat's chief executive, said Thames Water had let down its customers and failed to protect the environment thanks to frequent sewage spills into rivers and streams.

"Our investigation has uncovered a series of failures by the company to build, maintain, and operate adequate infrastructure to meet its obligations," he said. "The company also failed to come up with an acceptable redress package that would have benefited the environment, so we have imposed a significant financial penalty."

Thames Water is currently trying to attract investment and is reportedly in talks with private investment group KKR about an investment of up to 5 billion pounds.

The BBC said Thames Water is also hoping to persuade existing lenders to accept discounted payments, and some smaller lenders are being urged to write off their debts.

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