Thames Water’s CEO pleads for fines relief to secure company’s future
Thames Water’s chief executive, Chris Weston, has made a public plea to industry regulator Ofwat, urging leniency regarding fines and penalties as the company faces significant financial difficulties.
Weston emphasized that the survival of the private utility company could depend on how the regulator handles its requests for flexibility, particularly in relation to fines over pollution and service disruptions.
In testimony before MPs, Weston explained that any substantial fines could jeopardize the company’s ability to attract new investment, potentially leading to a form of nationalization.
Weston also highlighted that Thames Water was struggling to meet performance targets, particularly concerning sewage discharges and leaks, while attempting to turn its operations around.
“We know the supply interruptions cause inconvenience and sometimes real hardship,” Weston said, acknowledging the company’s track record on customer service.
However, he stressed that, despite these challenges, Thames Water must be given the opportunity to improve without facing additional financial burdens in the form of fines.
The utility company has been engaged in ongoing talks with Ofwat to negotiate a “turnaround regime,” hoping to break free from a cycle where penalties for poor performance lead to further financial difficulties.
Thames Water has estimated that it could face fines of up to £900 million over the next five years due to leaks and sewage spills, a situation that would severely hinder its efforts to secure much-needed investment.
The company’s situation has prompted the UK government to prepare for the possibility of putting Thames Water into special administration, a move that could help stabilize the company if it fails to recover financially.
Meanwhile, Thames Water is also negotiating with private investment group KKR about a potential cash injection of up to £5 billion, a deal contingent on creditors accepting a discount on the nearly £20 billion the company owes.
Despite the financial turmoil, Weston remains optimistic, asserting that the company needs the flexibility to continue operating and improving its services.
“What had occurred with these very high tariffs… was the equivalent of an embargo, and neither side wants that,” Weston said, drawing a parallel between the company’s struggles and the broader pressures facing industries under financial strain.
However, the public’s response has been less forgiving. Mike Keil, chief executive of the Consumer Council for Water (CCW), said, “Customers will have little sympathy for a company with such a poor track record on service delivery and complaints.”
While Thames Water works to avoid nationalization, it is also under scrutiny for its high executive bonuses, which have raised eyebrows amid the company’s ongoing crisis.
Despite the financial challenges, the company’s chairman, Sir Adrian Montague, defended the bonus payments, stating that they were necessary to retain key staff in a competitive marketplace.
In his first three months as chief executive, Weston received a £195,000 bonus as part of his £2.3 million pay package, a figure that can rise to 156% of his salary. In contrast, frontline workers receive much smaller bonuses, ranging from 3% to 6%.
The controversy over bonuses comes amid Thames Water’s efforts to address its operational challenges and financial difficulties.
The company’s debt stands at £19 billion, and customer bills are set to rise by 35% by 2030, though Thames Water has expressed a desire for higher increases.
Critics, however, question whether the company’s management should be entitled to large bonuses while it grapples with such substantial debt and customer dissatisfaction.