Ministers to block Thames Water paying bosses bonuses out of emergency loan

Ministers program to usage caller powers to artifact bosses from Thames Water taking bonuses worthy hundreds of thousands of pounds arsenic the institution fights for survival, the Guardian tin reveal.

Britain’s biggest h2o institution admitted this week that elder managers are successful enactment for “substantial” bonuses linked to an emergency £3bn loan.

Thames claimed the payouts were captious to clasp unit and forestall rival companies from “picking off” its champion employees.

But the disclosure provoked fury – the institution has said its finances are “hair raising” and that it had travel “very adjacent to moving retired of wealth entirely” past year.

Thames is successful a hopeless contention to rise funds and persuade the h2o regulator to fto it disconnected hundreds of millions of pounds of fines, oregon hazard being renationalised.

Government sources said these bonuses could beryllium banned arsenic soon arsenic adjacent month, and immoderate paid for the past fiscal year, betwixt April 2024 and April 2025, could beryllium clawed back. The situation secretary, Steve Reed, said “the days of profiting from nonaccomplishment are over”.

It emerged this week that the institution was readying to usage portion of a £3bn exigency loan, which was meant to stabilise Thames’s finances and prevention it from collapse, to wage bonuses for elder executives.

Thames’s chair, Sir Adrian Montague, told MPs connected the environment, nutrient and agrarian affairs (Efra) committee connected Tuesday that the archetypal of these bonuses would beryllium up to 50% of their salary, arguing elder managers are its “most precious resource”.

The bonuses could beryllium the archetypal to beryllium blocked nether Reed’s h2o (special measures) bill, which gives the regulator Ofwat powers to prohibition fiscal rewards for executives presiding implicit a failing company. Thames Water could beryllium classed arsenic such, arsenic it is presiding implicit record sewage spills, heavy laden with indebtedness and connected the brink of fiscal collapse.

Reed said: “Water companies got distant with dumping a tidal question of sewage into our stream portion pocketing millions pounds of bonuses.

“That ends now. The authorities volition prohibition the outgo of unfair bonuses for polluting h2o bosses. The days of profiting from nonaccomplishment are over.”

Chris Weston, Thames’s main executive, was paid a bonus of £195,000 for 3 months of enactment aft helium joined the institution successful January 2024, giving him a full bundle of £2.3m. However, this bonus is improbable to beryllium affected by Reed’s clampdown.

Weston defended his wage to MPs, claiming: “I joined Thames due to the fact that it matters to society. Within the archetypal 3 months I did marque a difference.”

Weston’s bonus could magnitude to arsenic overmuch arsenic 156% of his pay, compared with 3% to 6% for frontline workers, helium said.

Montague told MPs that immoderate elder executives would beryllium fixed “50% of salary, precise important bonuses” from the £3bn loan, which was precocious by lenders including Aberdeen and Insight Investment arsenic good arsenic hedge funds and different investors successful distressed companies specified arsenic Elliott and Silver Point.

Montague said: “We person a bonus strategy to support our astir precious resource, which is the elder absorption team.” He said the bonuses would beryllium paid successful 3 stages, “in completion of the archetypal restructuring plan, different 1 astatine the extremity of the 2nd restructuring plan, and past a ample magnitude close astatine the extremity of the process”.

The £3bn creditor indebtedness – which was challenged successful tribunal by rival bondholders – comes with a 9.75% involvement rate, positive fees. Montague claimed the bonuses were “insisted” upon by the lenders. “We request this squad to enactment until the completion of the transaction,” helium said, adding the bonuses linked to the £3bn indebtedness “will beryllium funded by the lenders” and not customers.

Payouts for executives astatine h2o companies person provoked outrage arsenic they preside implicit grounds sewage spills, deficiency of concern successful captious infrastructure and ballooning indebtedness levels. Last twelvemonth a grounds £9.1m successful bonuses was paid retired to h2o executives.

Helena Dollimore, an Efra committee subordinate and Labour MP for Hastings, Rye and the villages, said: “Thames Water’s grounds astatine the prime committee was damning, and different reminder of the dire authorities of the h2o industry. Vital infrastructure enactment was delayed, pipes near to crumble, each portion the h2o bosses were rewarded with immense bonuses.

“We’ve hauled successful the h2o bosses 1 by 1 and the communicative of nonaccomplishment is ever the same. Water bosses should not proceed to beryllium rewarded for failure, truthful I americium pleased to perceive decisive enactment is yet being taken.”

Last year, Thames Water saw a 40% summation successful contamination incidents, but £770,000 was inactive paid retired successful show bonuses. Customers saw their bills rise this twelvemonth aft the institution was fixed support to assistance them by 35%. Thames wishes to rise these further to 59%, and has an entreaty to the Competition and Markets Authority nether way, though this has been deferred portion it attempts to get its finances successful order.

Thames is successful a hopeless contention to find a purchaser consenting to inject currency arsenic it teeters connected the brink of impermanent nationalisation. The company, which has 16 cardinal customers and 8,000 employees, recently came wrong days of moving retired of wealth and is labouring nether £20bn of debt.

The US backstage equity steadfast KKR, which hopes to get a £4bn stake, is the past enactment for Thames arsenic it scrambles to find a purchaser by the extremity of June. Thames and KKR are trying to transportation Ofwat, the manufacture regulator, to assistance leniency connected fines and penalties.

Ofwat had said it would similar 2 companies to beryllium successful the last signifier of checks earlier a bid was picked, MPs said. However, should that takeover fail, the heavy indebted inferior could illness into authorities hands via the peculiar medication authorities (SAR).

Thames Water customers, arsenic good arsenic those of different companies, are facing hosepipe bans this summer unless determination is important rainfall soon. Reservoir levels are astatine little than 85% connected mean crossed the UK, and they are usually afloat astatine this clip of year. No reservoirs person been built successful England for much than 30 years, which leaves the state peculiarly susceptible to drought. Water companies including Thames person been criticised for a deficiency of concern successful important infrastructure to unafraid the UK’s h2o supply.

A Thames Water spokesperson said: “Thames Water is progressing a analyzable turnaround and restructuring process truthful we tin present amended results for our customers and the situation and question a semipermanent solution to our fiscal resilience. It is captious that the concern retains the radical champion placed to present the improved outcomes our stakeholders rightly expect.”