Castle Water returns with improved bid for Thames Water, The Times reports

(Corrects attribution to The Times from the Financial Times in headline and paragraphs 1, 4 and 6)

(Reuters) -British utility Castle Water has returned with an improved bid for struggling firm Thames Water, offering a cash injection of at least 1 billion pounds ($1.32 billion) above current proposals, The Times reported on Sunday.

Thames Water, which has 16 million customers, has been at the centre of an environmental scandal in Britain where it has been fined more than 100 million pounds for sewage spills, while debts of 20 billion pounds have left it close to collapse.

The water utility and its lenders are racing to secure a long-term rescue deal before the first tranche of an emergency lifeline expires as early as the end of the year, with creditors offering to write off 7.5 billion pounds of debt among other measures to avoid nationalisation.

In an interview with The Times, Castle Water Chief Executive John Reynolds said that his group's latest proposal entailed that extra money would be targeted at addressing Thames Water's pollution crisis.

He also said talks between the debt-laden water utility's creditors and industry regulator Ofwat had "possibly irretrievably" stalled.

The Times report, however, said that a spokesman for London & Valley Water, a consortium of Thames Water lenders, denied that claim.

Castle Water's latest proposal is backed by the privately-owned property empire of the Pears family, the report said.

"Discussions between TWUL's senior creditors, the London & Valley Water Consortium, Ofwat, and other regulators in relation to a potential market-led solution to the recapitalisation of the company are continuing," a Thames Water Spokesperson told Reuters in an emailed statement.

The company remains committed to delivering a recapitalisation deal that supports customers and environmental goals as soon as practicable, the spokesperson said.

Ofwat, Castle Lake, London & Valley Water and Pears Property did not immediately respond to Reuters' requests for comment.

($1 = 0.7603 pounds)

(Reporting by Raechel Thankam Job and Ankita Bora in Bengaluru; Editing by Rashmi Aich and Subhranshu Sahu)