Thames Water chair could face questions after comments to MPs on bonuses
The chair of Thames Water could face more questions over his statement to parliament that large bonuses to be paid to senior bosses out of an emergency £3bn loan were 'insisted' upon by creditors.
Sir Adrian Montague told the environment, food and rural affairs (Efra) select committee last week that the lenders 'insisted' that 'very substantial' bonuses of up to 50% of salary should be paid to company executives from the controversial loan in order to retail key staff.
The proposed bonuses provoked fury as the company has said its finances are 'hair raising' and that it had come 'very close to running out of money entirely' last year.
Sources and court documents suggest the bonuses were agreed by the creditors, but not necessarily proposed by them.
Sources close to Thames said that it was executives at the company who pushed for the retention incentives and said all decisions ultimately had to be made by a committee on Thames's board of directors that is responsible for remuneration.
The term sheet for the loan simply agrees that retention payments could be a factor at some point, and this was agreed to and not insisted upon by creditors. Sources close to the lenders also said accessing the loan is not contingent on paying bonuses to Thames executives.
Montague will not be among the executives paid the retention incentives, it is understood.
Montague last week told the Efra committee that senior managers were the company's 'most precious resource' and that the group of lenders had asked for the retention payments.
He said: 'To be honest, this is the first time that I have encountered this. I have done a few reconstructions in my time, and I do not think we would have got there but for the fact that the lenders insisted, should we say.' He added that the bonuses linked to the £3bn loan 'will be funded by the lenders' and not customers.
In a judgment in February approving the loan Mr Justice Leech cited evidence by Thames's then finance director, Alastair Cochran, that the retention plan 'was a matter for the board and the retention committee'. Leech said there was no evidence that it had to be approved by the lenders.
A Thames Water spokesperson said in a statement: 'Thames Water is progressing a complex turnaround and restructuring process so we can deliver better results for our customers and the environment and seek a long-term solution to our financial resilience.
'During our liquidity extension discussions it was agreed that a retention plan was important to retain the people best placed to deliver the improved outcomes our stakeholders rightly expect during this current period of uncertainty and this was reflected in the term sheet we agreed with our creditors on 25 October 2024.'
The company declined to repeat Montague's assertion or go beyond its statement.
The UK's largest water company is in a desperate race to raise funds and persuade the water regulator to let it off hundreds of millions of pounds of fines or risk being renationalised. The company won a court battle which allowed it to accept the loan, which comes with an expensive 9.75% interest rate and fees.
Sign up to Business Today
Get set for the working day – we'll point you to all the business news and analysis you need every morning
after newsletter promotion
The Guardian revealed last week the bonuses could be the first to be blocked under the government's water (special measures) bill, which gives the regulator Ofwat powers to ban financial rewards for executives presiding over a failing company. Thames Water could be classed as such, as it is presiding over record sewage spills, heavily laden with debt and on the brink of financial collapse.
The environment secretary, Steve Reed, said last week that 'the days of profiting from failure are over'.
Thames is trying to argue that the bonuses are not performance-related pay as they are retention payments, but ministers insist they will still be able to block them under the new rules, and have said this proposal is a 'crude attempt' at clinging on to bonuses. A consultation on the new bonus rules is still ongoing but ministers hope they will be in place by June.
Alistair Carmichael, the chair of the Efra committee, said: 'This is a serious matter which my committee will look at carefully. The government has already stated it expects Ofwat to block the bonuses discussed in our hearing with Thames Water last week. We look forward to discussing these and other developments relating to the water sector in our evidence session with the secretary of state on Tuesday.'
A spokesperson for the creditors declined to comment.
The company, which serves about a quarter of the country's population, is loaded with £20bn in debt and is now in exclusive discussions with the private equity group KKR over a potential purchase of the business.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Sky News
12 minutes ago
- Sky News
Rachel Reeves turning around UK's finances 'like Steve Jobs did for Apple', claims minister
Rachel Reeves will turn around the economy the way Steve Jobs turned around Apple, a cabinet minister has suggested ahead of the upcoming spending review. Science and Technology Secretary Peter Kyle compared the chancellor to the late Apple co-founder when asked on Sky News' Sunday Morning with Trevor Phillips where the £86bn for his department is coming from. The package, confirmed ahead of the full spending review next week, will see each region in England granted £500m to spend on science projects of their choice, including research into faster drug treatments. Asked by Trevor Phillips how the government is finding the money, Mr Kyle said: "Rachel raised money in taxes in the autumn, we are now allocating it per department. "But the key thing is we are going to be investing record amounts of money into the innovations of the future. "Just bear in mind that how Apple turned itself around when Steve Jobs came back to Apple, they were 90 days from insolvency. That's the kind of situation that we had when we came into office. "Steve Jobs turned it around by inventing the iMac, moving to a series of products like the iPod. "Now we are starting to invest in the vaccine processes of the future, some of the high-tech solutions that are going to be high growth. We're investing in our space sector... they will create jobs in the future." The spending review is a process used by governments to set departmental budgets for the years ahead. Asked if it will include more detail on who will receive winter fuel payments, Mr Kyle said that issue will be "dealt with in the run-up to the autumn". "This is a spending review that's going to set the overall spending constraints for government for the next period, the next three years, so you're sort of talking about two separate issues at the moment," he said. 0:42 Scrapping universal winter fuel payments was one of the first things Labour did in government - despite it not being in their manifesto - with minsters saying it was necessary because of the financial "blackhole" left behind by the Tories. But following a long-drawn out backlash, Sir Keir Starmer said last month that the government would extend eligibility, which is now limited to those on pension credit. It is not clear what the new criteria will be, though Ms Reeves has said the changes will come into place before this winter. Mr Kyle also claimed the spending review will see the government invest "the most we've ever spent per pupil in our school system". However, he said the chancellor will stick to her self-imposed fiscal rules - which rule out borrowing for day-to-day spending - meaning that while some departments will get extra money, others are likely to face cuts.
Auto Express
20 minutes ago
- Auto Express
The car is still king! Ridiculous train fares make them look like absolute bargains
When I'm not happily driving cars, I'm a grudging train passenger who's regularly ripped off, let down or disillusioned by this much-hyped strike-prone public transport. The customer experience is so underwhelming that my confidence in, and respect for, Britain's heavily subsidised rail industry has rarely – if ever – been lower. Advertisement - Article continues below I'm not sure if it's me giving up on the train or the train giving up on me. Either way, the 'alternative to the car' is as implausible now as it was in the nineties, when notoriously hypocritical Transport Secretary John Prescott (a user of two Jaguars) told me to tell you, dear reader, that the train would soon take over as the preferred mode of transport for the average Brit. This was as blatantly untrue then as it is now, not least because the cost of rail travel is exorbitant. Travel from, say, Cardiff to Aberdeen and the standard single/one-way fare is from £285.50 – more than many flights from the UK to the Far East. People in central London doing short journeys can pay up to £15 per mile. In the Stratford quarter of the capital, passengers can pay up to £2.21 per minute on the fastest trains. A standard annual season ticket from Ebbsfleet, Kent, to St Pancras, 20 miles and minutes up the line, costs £6,000-plus. Add £1,815 for a yearly parking pass and an extra £2,000 for tube or taxi fares and we're talking £10,000 or more per annum. That's enough to buy a used car, refuel petrol tanks for several years, or charge an electric car at home for well over a decade. If tickets weren't so prohibitively expensive and responsible for preventing freedom of movement among low-paid workers, students, shoppers, holidaymakers and cash-strapped folk seeking jobs, social lives or both, they'd be comical. But current Transport Secretary Heidi Alexander can still deliver some rail-related hilarity – as she proved with her performance on 25 May, when her Government began renationalising rail services. 'Today marks a new dawn for our railways,' she enthused during her away-day on the first renationalised train from London's Waterloo station. Further promises included 'moving away from 30 years of failing passengers', who now get 'higher standards'. She has to be the funniest Transport Sec cum stand-up comedian since Two Jags Prescott. How so? Because her highly symbolic train ride couldn't be completed by, er, train. It took her four times longer than scheduled. And it was completed only after passengers were embarrassingly turfed off and ordered to complete their journeys in dreaded rail-replacement buses which, in my experience, are even more unpleasant (if that's possible) than iffy trains or railway lines. If Britain's highest-ranking transport politician believes that this latest fiasco and wallet-busting fares represent 'higher standards', she's more out of her depth than I feared. Trains too expensive in your area? We can help you find a great deal on a new car instead ...
The Independent
25 minutes ago
- The Independent
Spending review: Schools to get more funding but police warned to ‘do their bit'
Schools are set to receive a funding boost in the spending review, a Cabinet minister has indicated, as he insisted other public services must 'do their bit' amid concerns about cuts to other budgets. Technology Secretary Peter Kyle said the Government will commit to investing 'the most we've ever spent per pupil' next week, but declined to rule out the prospect of a real-terms squeeze on areas such as policing. Facing questions from broadcasters on Sunday about which public services will be prioritised, Mr Kyle said 'every part of our society is struggling' and numerous sectors had asked Chancellor Rachel Reeves for more money. 'On the fact that the police have been writing to the Chancellor, they have,' the Cabinet minister told the BBC's Sunday With Laura Kuenssberg programme. 'We also have letters from the universities, we have letters from doctors about the health service, we have letters from campaigners for child poverty writing to us, and other aspects of challenges in Britain at the moment. 'Every part of our society is struggling because of the inheritance that we had as a country and as a Government.' He pointed to the £1.1 billion extra funding already earmarked for police this year, warning that public services would be expected to 'do their bit' alongside Government as he defended Ms Reeves' stewardship of the country's finances. 'We expect the police to start embracing the change they need to do, to do their bit for change as well. We are doing our bit,' Mr Kyle said. 'You see a Chancellor that is striving to get investment to the key parts of our country that needs it the most… You will see the priorities of this Government reflected in the spending review, which sets the departmental spending into the long term. 'But this is a partnership. Yes, the Treasury needs to find more money for those key priorities, but the people delivering them need to do their bit as well.' The Department of Health is set to be the biggest winner in Ms Reeves' spending review on Wednesday, with the NHS receiving a boost of up to £30 billion at the expense of other public services. Economists have said the expected 2.8% annual increase in its day-to-day budget, which amounts to a rise of about £30 billion by 2028, or £17 billion in real terms, will see other departments squeezed. Speaking on Sunday, Mr Kyle said the schools system, along with an £86 billion funding package for research and development, would be top priorities as the Government seeks to 'invest in the future.' 'You will see in this spending review that we are investing the most we've ever spent per pupil in our school system,' he told Sky News. Mr Kyle said Labour was 'absolutely laser-focused' on delivering manifesto pledges amid questions about how competing commitments will be balanced with little room for manoeuvre amid narrow fiscal headroom. Asked about the Government's plan to build 1.5 million new homes by the end of the Parliament, the minister declined to guarantee Housing Secretary Angela Rayner's department would not face cuts. But he added: 'We made a manifesto commitment. We are absolutely laser-focused on delivering that.' He said the Government was also 'on the way' to delivering 13,000 new police officers, another manifesto pledge. Ms Reeves has acknowledged that she had been forced to turn down requests for funding in a sign of the behind-the-scenes wrangling over her spending review. She blamed the former Conservative government's stewardship of the economy rather than her self-imposed fiscal rules, which include a promise to match day-to-day spending with revenues. It comes after the Government announced science and technology sectors would receive new funding as part of an £86 billion package set to be confirmed next week. Mr Kyle's Department for Science, Technology and Innovation (DSIT) said the money would help research into new drug treatments and microchips used to power mobile phones and electric cars. The Tories accused Labour of copying their own plans in office over the commitment. Shadow technology secretary Alan Mak said: 'Labour's central budget announcement seems to be a reheat of Conservative plans just showing this Chancellor will copy and paste anyone's ideas to get out of the mess that she's put herself in. 'As Labour and Reform squabble over how to spend more taxpayers money, only the Conservatives are creating a serious plan for government to deliver growth and give you your country back.'
