A management clearout is being planned at Thames Water by its new owner, the Australian bank Macquarie.
Jeremy Pelczer, Thames's chief executive, is expected to quit following the £8bn sale earlier this week of Britain's biggest water company by RWE of Germany.
The chairman, Jim Forbes, is also unlikely to stay. Instead Macquarie is drafting Sir Peter Mason, former chief executive of the engineering group Amec, on to the board in a senior non-executive role.
The changes come as consumer watchdogs warned Macquarie it would have to improve on RWE's "deeply disappointing" ownership of Thames.
There may be more headcount reductions across the group, although Thames's sources said the 25 per cent staff reduction announced in the summer - equal to 1,200 jobs - was well on the way to being achieved, such was the level of applications for redundancy. "Morale in the company is rock bottom because of the uncertainty caused by the sale process and constantly being second-guessed from Germany so a lot of people have applied for voluntary severance," said one insider.
Details emerged of the way in which the Macquarie bid is being structured and financed. The group of investors led by Macquarie, known as Kemble Water, is funding the takeover with £2.3bn of equity. A further £4bn of debt is being underwritten by Barclays Capital, HSBC, Royal Bank of Canada and Dresdner Kleinwort. The remaining Thames debt is being rolled over. After taking into account some £500m of cash in the business, Thames's debt to equity will rise to about 65 per cent - towards the top end of the range that the water regulator Ofwat is happy with.
Macquarie itself is only taking 11 per cent of the equity at a cost of about £250m. The bulk of the risk capital is being put up by the investors in its various infrastructure funds.
Despite speculation that the three losing bidders in the Thames auction would turn their sights on other quoted water companies, share prices fell across the sector yesterday. Severn Trent, Pennon, the owner of South West Water, Kelda, the parent company of Yorkshire Water, and Northumbrian Water all lost ground.
Macquarie declined to comment on the acquisition until it is approved by the RWE supervisory board this weekend. But the Australian bank will be under pressure to demonstrate the performance of the company will improve under its ownership.
Thames has been criticised for missing leakage targets and imposing a hosepipe ban and is facing fines of tens of millions of pounds from Ofwat for failing to meet customer performance standards.
David Bland, the chairman of the Thames Water Consumer Council, said the takeover should not distract managers from getting to grips with the "dubious legacy" RWE had left behind. "Not only was RWE's stewardship of Thames Water deeply disappointing, they have now departed half a billion pounds richer. They must be throwing their hats in the air, having profited massively without resolving any of the long-term issues Thames Water faces," he said.
Macquarie has reassured the regulator it will stick with the £3.1bn investment programme agreed with the previous management. This includes the £150m Thames has pledged to provide out of shareholders pockets to step up its mains replacement programme.