Thames Water boss defends bonus package despite growing debt and surge in sewage spills
9 July 2024, 18:59
Thames Water’s chief executive has defended his bonus package despite the company’s growing debt and increase in sewage spills.
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Chris Weston said his bonus was based “purely on performance” and claimed rewards for senior staff members are needed “to be able to attract the right talent”.
Britain's biggest water firm was responsible for 16,990 sewage discharges last year compared to 8,015 in 2022 while serious pollution incidents rose from 331 to 350 in that time.
It also comes as the company warned on Tuesday that it will run out of money by the end of next May due to their increasing debt and falling cash reserves, with their efforts to secure fresh funding intensifying.
Thames Water’s bonus payments were revealed in its full-year results on Thursday and showed that Mr Weston received £195,000 following his appointment in January, taking his total pay to £437,000 for the three months to the end of March.
Alastair Cochran, Thames Water’s chief financial officer, was given a £446,000 bonus, after previously stepping in as the company’s interim co-chief executive.
When asked about executives bonuses on Tuesday, Mr Weston said: “You need to be able to attract the right talent, the best talent to that company and going hand in glove with that is an appropriate remuneration package.”
Thames Water is creaking under a debt pile of more than £15 billion and said on Tuesday that it had £1.8 billion of cash reserves at the end of June, a fall from £2.4 billion three months previously.
The firm said it is still looking for new funds needed to maintain and update its infrastructure, after investors pulled the plug on £500 million of emergency cash earlier this year.
Mr Weston said Thames had taken "informal soundings which have shown there is interest in the market".
He added that the company will be looking at a "broad church" of potential investors which could include existing shareholders.
If it ultimately fails to attract fresh funding, Thames Water's fraying finances could present Sir Keir Starmer's newly elected Labour Government with a significant industrial crisis.
A blueprint codenamed Project Timber was being drawn up in Whitehall in the spring, according to reports, which could see the company effectively nationalised.
Under the plans, the company would be placed in a form of special administration in the scenario that its parent company fails.
Mr Weston added that it is "not in the interests" of customers or investors for the company to fall into Government hands.
Communities minister Jim McMahon said on Tuesday morning: "We recognise that, over the last 14 years, frankly, the water industry hasn't been regulated anywhere near as firmly as it should have been, and we haven't seen the investment to deal with the sewage scandal."
He said there is a need for reform and for regulation to be looked at, adding: "The days of putting shareholder interest above the national interest, frankly, can't carry on and so we do need to look at that and Thames do need to look at their own house and get it in order."
Mr McMahon said there is "no programme of nationalisation for the water industry" when asked what the plan is if the company collapses.
He did however say there is "no provision in law for a water company to stop providing water", adding: "We need to be very clear there is always a contingency in place."
Thames Water's financial update will be followed on Thursday by a draft verdict from Ofwat on water companies' five-year spending plans and bill increases to 2030.
That will kick off six months of negotiations with Ofwat, ahead of its final decision in December.
Thames Water, which has 16 million customers in London and the Thames Valley region, put forward plans in April that would see spending rise to £19.8 billion to update its infrastructure and reduce sewage spills.
However, that would also involve increasing customer bills by 44 per cent, a figure which has prompted backlash from consumer groups.
Meanwhile, the process of securing new cash is "not expected to conclude" until after Ofwat's final decision on Thames' business plan in December.
Any increase in bills would be greeted with anger, after Thames Water and other water companies' disastrous recent environmental records sparked a nationwide scandal over pollution.
Thames said pollution incidents increased to 350, up on 331 last year, which it blamed on a rainier-than-expected year.
The number of "serious pollutions" decreased by 18 per cent, Thames Water said.
When questioned on the issue on Tuesday, Mr Weston said: "You might not like the answer, but rain has a big impact on spills."
It comes amid reports that Sir Keir has been briefed that the poor state of Thames Water's physical infrastructure presents a "critical risk" to the country.
Fears about the company include its management of sites that provide drinking water and sewage treatment for London and the Thames Valley, The Guardian newspaper reported.
Thames Water said it spent £2 billion on maintaining and updating its infrastructure last year.
The Prime Minister's official spokesman told reporters on Monday: "The Government has said in its manifesto that we will put failing water companies into special measures and they will have no choice but to clean up their act.
"We talked about giving regulators the power to block payment of bonuses to executives who pollute our waterways and impose automatic and severe fines on them for wrongdoing."
