Thames Water's survival as a private company depends on the industry regulator Ofwat being lenient over fines and penalties, its boss Chris Weston has said.
Speaking to MPs, Mr Weston said the firm would not get new investment if money leaked out of the business, leading to some form of nationalisation.
Thames Water would struggle and fail to hit performance targets on pollution while it tried to turn the company around, he added.
The troubled company is currently in talks with Ofwat in an effort to persuade it to give some leeway on fines, but the regulator has told the BBC there is a "high bar" for flexibility within its regulations.
Thames has faced heavy criticism over its performance in recent years following a series of sewage discharges and leaks.
Since the dire state of the company's finances first emerged about 18 months ago, the government has been on standby to put Thames into special administration.
The firm is in discussions with Ofwat to put in place a "turnaround regime" designed to let it escape a loop where fines lead to further fines because it has not got the money to improve.
Thames has estimated it could be fined up to £900m over the next five years for leaks and sewage spills which would hinder efforts to attract new investment.
Regardless of what happens to the company in the future, water supplies and waste services to households will continue as normal.
An Ofwat spokesperson said it would be looking at how proposals of potential bidders would make the company stronger and turn it around.
The regulator already has some flexibility in applying the rules if it is in customers' interests, "but there is a high bar for this", they added.