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The Thames Water boss defended his decision to take the bonus, saying the struggling utility “needs to attract the best talent” to ensure its survival.
Chris Weston, who took over as chief executive in January, received a £195,000 bonus in the three months to the end of March, taking his total pay to £437,000 for a period when Britain’s biggest water company battled to avoid nationalisation.
Weston said the bonus was based “purely on performance” because Thames “needed to be able to attract the best talent to the company”.
Alastair Cochran, the finance director, received total pay of £1.33m for the 12 months to the end of March, including a bonus of £446,000, partly because he was co-chief executive for part of the year, the company said in its annual report on Tuesday.
The bonus prices come as Thames Water urges regulator Ofwat to sign off on a business plan that would make the company “investable” as it vows to raise the fresh capital it needs to stave off collapse.
Thames Water wants to increase 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 on Thursday, along with other water companies, in one of the most high-profile announcements since the sector was privatized in 1989.
The regional monopoly, which provides water and sewage services to about 16 million households, has already admitted that its infrastructure poses a risk to public health and safety. On Tuesday, it disclosed that customer complaints were up 10 percent year-on-year, while pollution cases were up 6 percent.
The fate of Thames is one of the first major challenges facing the new Labor government, which has said it wants to prevent the company from being taken back into public ownership.
Thames Water said it had £1.8bn of cash, enough to cover its operations until May 2025 – the same as in its last update. The Ofwat-regulated entity’s net debt rose to £15.2bn at the end of March, up from £14bn in the previous financial year.
Although the company reported its first post-tax profit in four years of £139m – compared with a loss of £132m the previous year – this was almost entirely down to a 10 per cent rise in household bills last year.
Thames admitted there were “substantial uncertainties” about its long-term survival, including the risk of not securing commitments for future funding, downgrading its credit rating or failing to comply with legal requirements, which could lead to the failure of its credit banks.
But Weston said renationalisation “is something that is not in the interests of any of our stakeholders or the British taxpayer”.
“I can’t put any probability on whether or not it will happen, but if it should happen, it’s a long shot. There is much more we can do. . . so that it doesn’t happen.”
Thames is under increasing pressure to secure new investment after shareholders – which include Chinese and Abu Dhabi sovereign wealth funds as well as UK and Canadian pension funds – said in March that the company was “uninvestable” and backed away from a pledge to inject £500m this year pounds. and a total of £3.25 billion over the next five years.
Weston said on Tuesday that Thames Water had taken “informal inquiries” from investors and identified “some interest” in providing cash, but the capital raise was not expected to start until the autumn or finish before the start of the new year.
It also depends on Ofwat agreeing to Thames Water’s business plan. The regulator is unlikely to approve all the increases in the bill that Thames Water or other utilities are seeking, given the cost of living crisis and growing resentment against water companies.
Although current investors have asked for leniency on regulatory fines and dividend payments and signaled their willingness to suffer an estimated £5bn loss, any easing of sanctions by Ofwat is likely to fuel public anger at the company. The business is already under fire for handing out high pay packages and dividends, as well as service failures and sewage pollution, including 14.2 billion liters of sewage and rainwater pumped into the River Thames in central London last year.
The company said on Tuesday it paid out £195.8m in dividends for the year, none of which went to outside investors. However, Ofwat does not distinguish between dividends paid to service debt in entities within a corporate group and dividends paid to external shareholders, meaning these payments could attract further ire from Ofwat.
The Labor government has promised to crack down on water companies over sewage pollution.
During the election campaign, Jonathan Reynolds, now business secretary, said Labor would not want to return Thames Water to public ownership, without specifying the approach the party would take if the company failed to find new backers.
A potential alternative to nationalization would be a new “renewal regime” drawn up by Ofwat, which would bring closer oversight but come with a set of measures to encourage the company to upgrade infrastructure.