Thames bonuses under scrutiny

Thames chair Sir Adrian Montague has confirmed, in a letter to the Environment, Food and Rural Affairs Committee, that the utility paid bonuses totalling £2.46m to 21 managers on 30 April as part of its Management Retention Plan (MRP). The managers are due to receive the same amount again in December, and a further £10.8m collectively next June. Montague said that “the board does not intend to recover this money”.

The 21 individuals who received payments did not include Montague himself, chief executive Chris Weston, or chief financial officer Steve Buck. Sir Adrian added that the planned bonuses would be £18.5m in total, spread across three payments over two years: “50% of base salary on 30 April 2025; 50% on completion of the current restructuring plan or, if earlier, December 2025; and a final payment of 200% of base salary in June 2026.” However, the scheme of payments he confirmed had been “paused” pending a review.

The EFRA Committee has written to environment secretary Steve Reed the asking “whether you expect Ofwat to recoup the payments made on 30 April to all 21 of Thames’ management team?” Alistair Carmichael, the chair of the committee, said: “As a committee, we are trying to seek clarity as to whether these payments fall within the remit of the Government’s ban and will be recouped, given that they were not paid to the company’s CEO or CFO and are termed by Thames Water as ‘retention payments’ rather than bonuses. We are also asking whether Defra and Ofwat were aware of these payments and what undertakings they have received from Thames Water about the pausing or withdrawal of the retention plan.”

A Thames spokesman responded to clarify that none of the retention payments have been funded by customers and that full details of the plan have been shared with the economic regulator. Ofwat will need to assess whether Thames Water has breached the Water (Special Measures) Act with any of these payments and, if so, to take appropriate action. These may be simply retention payments rather than a bonus as they have no performance-related element. However, payments to Buck, who was in line for a retention bonus in June, could be blocked. The committee has recalled Sir Adrian and Weston for a hearing on 15 July.

• In his letter, Sir Adrian also updated the Committee on Thames’ equity raise options following KKR’s withdrawal as preferred bidder. Alongside the senior creditors’ plan, he reported Castle Water and CKI had “approached us to indicate a potential willingness to reengage” but added that at present, the board is pursuing the senior creditors’ plan. He continued: “For completeness we have also been approached by an entity which identifies as Titanium SPV, although we have been unable to verify that such entity exists, and in very recent days we have been approached by an individual connected with the water industry with an outline plan to recapitalise Thames Water by tokenisation of debt but with no or low equity injected.” The FT linked Lord Rupert Redesdale to this bid. He has just resigned as director and secretary of business water supplier The Water Retail Company.

• In separate correspondence, Weston provided information on a range of topics including dividends, estimated special administration regime costs, Thames’ marketing expenditure and legal fees. He stated that Thames Water’s “marketing (advertising) expenditure over the past five years was £14.6m”. On legal fees, he said: “We estimate that our legal fees for work done in connection with our liquidity extension transaction, as implemented through the interim restructuring plan at the High Court and Court of Appeal, was approximately £67.6m”.