Thames Water chief defends bonus amid plan for hefty bill increases

The head of Thames Water has defended his decision to take a bonus, saying the struggling utility “needs to attract the best talent” to ensure its survival.

Chris Weston, who joined as chief executive in January, took a £195,000 bonus for the three months to the end of March, taking his total pay to £437,000 for a period when Britain’s largest water utility has been battling to avoid nationalisation.

Weston said the bonus was based “purely on performance” as Thames “needed to be able to attract the best talent to the company”.

Alastair Cochran, chief financial officer, received total pay of £1.33mn for the 12 months to the end of March, including a £446,000 bonus, in part because he was co-CEO for part of the year, the company said in its annual report on Tuesday.

The bonus awards come as Thames Water urges regulator Ofwat to sign off on a business plan that would make the company “investable”, as the utility vows to raise the new equity it needs to stave off collapse.

Thames Water wants to raise average household bills by 59 per cent between 2025 and 2030 as part of its five-year business plan. Ofwat is expected to announce a draft decision on the group’s business plan, alongside that of other water companies, on Thursday, in one of the most high-stakes announcements since the sector’s privatisation in 1989.

The regional monopoly, which provides water and sewerage services to about 16mn households, has already admitted that its infrastructure poses a risk to public health and safety. It disclosed on Tuesday that the number of customer complaints had increased 10 per cent year on year, while pollution incidents had risen 6 per cent.

The fate of Thames is one of the first major challenges facing the new Labour government, which has said it is keen to avoid taking the company back into public ownership.

Thames Water said it had £1.8bn in liquidity, enough to cover its operations through May 2025 — the same as in its last update. Net debt at the entity regulated by Ofwat had climbed to £15.2bn at the end of March, up from £14bn in its previous financial year.

Although the company reported its first after-tax profit in four years at £139mn — compared with a loss of £132mn in the prior year — that was almost entirely down to a 10 per cent increase in household bills last year.

Thames admitted there were “material uncertainties” over its long-term survival, including the risk of not securing commitments for future funding, a downgrade to its credit rating or a failure to meet legal requirements, which could trigger a default with its lending banks.

But Weston said renationalisation “is something that is not in the interests of any of our stakeholders or the UK taxpayer”.

“I can’t put any probability on whether it will or won’t happen, but it is a long way off if it were to happen. There is a lot more that we can do . . . to make sure that does not happen.”

Thames is under growing pressure to secure new investment after shareholders — which include Chinese and Abu Dhabi sovereign wealth funds as well as UK and Canadian pension funds — in March said the company was “uninvestable” and backtracked on a promise to inject £500mn this year and a total of £3.25bn over the next five years.

Weston said on Tuesday that Thames Water had taken “informal soundings” from investors and identified “some interest” in providing cash, but the equity raise is not expected to start until the autumn or conclude until early in the new year.

It is also dependent on Ofwat agreeing to Thames Water’s business plan. The regulator is unlikely to approve all of the bill increases that Thames Water or other utilities are seeking, given the cost of living crisis and the growing outcry against water companies.

Although the current investors have asked for leniency on regulatory fines and dividend payments and signalled their willingness to take an estimated £5bn loss on the business, any easing of penalties from Ofwat is likely to fuel public anger against the company. The business is already under fire for dishing out high executive pay packages and dividends as well as service failures and sewage pollution, including 14.2bn litres of effluent and storm water pumped into the river Thames in central London last year.

The company said on Tuesday that it had paid £195.8mn in dividends in the year, none of which had gone to external investors. However, Ofwat does not distinguish between dividends paid to service debt in entities within the corporate group and dividends paid to external shareholders, meaning these payments could draw further ire from Ofwat.

The Labour government has vowed to take tough action against water companies for sewage pollution.

During the election campaign Jonathan Reynolds, now the business secretary, said Labour would not want to return Thames Water to public ownership without specifying the approach the party would take if the utility failed to find new backers.

A potential alternative to nationalisation would be a new “recovery regime” drawn up by Ofwat, which would bring closer supervision but come with a set of measures intended to encourage the company to upgrade its infrastructure.