The contract was put on hold last week after allegations that Thames had obtained the lucrative 25-year concession as a result of nepotism.
Under the agreement struck yesterday with the new Indonesian government, Thames will take over the 20 per cent stake in the venture held by PT Kekarpola Airindo, a company controlled by Suharto's son Sigit, and give the Jakarta regional authorities (PAM) a 5 per cent holding.
"After the transfer [from the Indonesia companies to Thames and Lyonnaise], PAM will cooperate with the two foreign companies as long as they form joint ventures with city-owned firms," said Jakarta's deputy governor for development affairs, Budiardjo Sukmadi.
He said the foreign firms would be allowed to resume their operations later this week. After PAM Jaya suspended the original contracts on 23 May, Thames employees were locked out of their own premises in Jakarta.
After the signing of the original agreement on 5 February, there were complaints after PAM Jaya announced a 25 per cent increase in water tariffs. The speaker of the city council, Edy Waluyo, said tariffs would be returned to their old levels while the new agreement was being worked out.