Thames Water boss to forgo bonuses as dividend scrutiny on suppliers intensifies
The boss of Thames Water will forgo performance related pay this year, with the much-maligned water supplier’s turnaround plans to deal with leaks, sewage and customer service behind schedule.
Chief executive Sarah Bentley will not take up any bonuses or long term incentive plans for the financial year 2022-2023 – while the company’s chief financial officer, Alastair Cochran, will also decline all performance-related pay.
Last year Bentley received £496,000 and Cochran was handed £298,000 in performance-related bonuses.
Thames Water is in the second year of an eight-year turnaround plan to combat ageing and deteriorating infrastructure, a legacy of under-investment and poor performance in the water industry.
The headwinds harming its turnaround include rapidly rising costs of energy and chemicals due to the invasion of Ukraine; sudden increases in interest rates; the severe weather events of a long drought in the summer and a rapid freeze-thaw in December.
Bentley said: “The turnaround plan is not yet where I want it to be primarily due to significant headwinds from extraordinary energy costs, coupled with two severe weather events. These have hit our customer and environmental performance. Against this backdrop it simply doesn’t feel right to take my bonus this year.”
It has managed to launch of a £1.6bn programme to modernise sewage infrastructure and improve river health while relocating the customer call centre, bringing it back from South Africa to Swindon creating 200 jobs.
Thames Water plans to expand the leaks repair team to more than 1000 engineers, enabling them to fix a leak every 7.5 minutes.
Emma Clancy, chief executive of the consumer council for water, said: “Our recent research shows that bonuses add to people’s current frustration with the water industry and they would like much more openness and transparency on this issue. This announcement shows that people’s concerns are being listened to”.
Bentley and Cochran’s decisions come at a time when Thames Water’s Remuneration Committee is working on a new performance-related pay structure – which will give a greater weighting to customer service and environmental performance than financial results.
Dividend payments under the microscope
Thames Water’s announcement follows reports that the UK’s privatised water and sewage companies paid £1.4bn in dividends in 2022, up from £540m the previous year.
This is despite rising household bills and sustained political criticism and scrunity over sewage outflows.
The figures, based on a Financial Times analysis of the 10 largest water and sewage companies’ accounts, are higher than headline dividends in the year to end March 2022.
This is because several have byzantine corporate structures with numerous subsidiaries.
Only one of which — the operating company — is regulated by Ofwat.
Such ambiguity allows providers to distinguish between internal dividends, which are defined as payments between intermediate holding companies in the group, and external dividends to private equity, such as sovereign wealth and pension funds.
These operate the entire water and sewage business including the holding companies.
The UK’s largest supplier, Thames Water, paid £37m in internal dividends to its parent company in the year to March 31 2022.
This was an increase from £33m in the previous 12 months, despite announcing that “external shareholders” had not received dividends for five years.
The Financial Times report is contentious bowever – as Ofwat data on the total dividends paid out in 2021-22 was just over £1bn (this includes dividend payments retained within the corporate structure).
There is growing pressure on the water industry from Whitehall over matters of performance, with environment secretary Therese Coffey confirming that water suppliers will be eligible for unlimited fines for sewage dumping.
Thames Water is also facing enforcement action from Ofwat and the Environment Agency over its handling of wastewater in its treatment works – which could also lead to heavy fines.
Thames Water has been approached for comment.