A leading European investor will pump fresh funding into Yorkshire Water including helping to cover a £600m loan, despite recent heavy sewage fines and a scandal over executive pay at the utility firm.

EQT, a Swedish private equity group, said on Monday it would take a 42% stake in Kelda Holdings, the Jersey-registered parent company of Yorkshire Water, which has 5.7 million customers across Yorkshire and parts of the East Midlands and Lincolnshire.

The move will effectively make it Yorkshire Water’s joint owner, bringing the stake of an existing shareholder, GIC, an investment firm, to 42%, and TCorp, the investment vehicle of Australia’s New South Wales public sector, to 16%.

EQT said part of the deal would involve contributing to a £600m “inter-company loan repayment” that is due before March 2027, while it was “fully supportive” of spending plans to clean up Yorkshire’s record on sewage spills.

The buyout group is already invested in four British plants that burn household and commercial rubbish to generate electricity, via a stake in the energy-from-waste company Encyclis, and water treatment operations spanning the US, Caribbean and Latin America, according to its website.

The deal comes as Yorkshire Water faces mounting scrutiny over its environmental record and executive pay. It was handed a £700,000 fine last month for repeatedly releasing sewage into a stream.

A succession of sewage pollution incidents in Pools Brook country park near Chesterfield from 2018 killed fish and insects and polluted the stream for more than half a mile, the Environment Agency found in February.

And last year the Guardian revealed that Nicola Shaw, its chief executive, had received £1.3m in previously undisclosed extra pay since 2023 via the offshore parent company.

Shaw was handed £660,000 from Kelda in the 2023-24 and the 2024-25 financial years, and the size of the fees were not disclosed in Yorkshire’s annual report.

That led to a government decision to close loopholes that allow water company bosses to continue getting large bonuses despite a ban passed last year.

Bosses of companies that illegally dumped sewage into England’s rivers and seas, including Yorkshire’s Shaw, had been paid millions in bonuses despite the ban. MPs have said the loopholes allowed companies to get around the bonus ban by labelling payments differently or paying bosses through linked companies.

On Monday, Shaw described the new investment as “a great step forward”. She added: “The EQT team will bring additional expertise to our board, and their backing is a strong vote of confidence in our plan to improve performance and the progress we have made so far.

“EQT has a long-term perspective and their team is committed to supporting the delivery of our £8.3bn investment programme.”

Kunal Koya, a partner at EQT Infrastructure, said the company was “a responsible private capital manager” and it could help in “modernising” the water sector.