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Senior managers at Thames Water were expected to receive £18.5 million in retained payments agreed as part of a £3 billion emergency loan, even if the UK’s biggest water operator touched on the brink of bankruptcy.
The payments suspended after protests from lawmakers on the House Environment, Food and Rural Affairs Committee were to be shared among 21 senior members of staff, but excluded CEO Chris Weston and other top directors.
In total, Thames executives have received three times their base salary by June next year, with documents released Monday showing that the first payment of 50% of their salary was initially paying 50% of their salary in April. The Thames Committee has no intention of collecting the money, Thames Chairman Ir Adrian Montague wrote in a letter dated May 30.
The future of Thames, struggling under a pile of £2 billion debt, is hanging in balance after US private equity firm KKR left the £4 billion rescue contract for utilities last week. The company provides water and sewage services to about a quarter of the UK population.
Former rock star Feargal Sharkey became a water campaigner, and he called for the payments to Thames executives to be “indecent, escaping all reasonable decency,” and he called for the company to be religious under the government’s special administrative regime.
According to a letter from Weston to the Environmental Commission’s chairman, Thames, the subject of public outrage over sewage overflow and pollution, is facing a potential fine from the Environment Agency of up to £480 million on a “worst case analysis basis.”
Thames Water CEO Chris Weston © Bloomberg
The potential fines were added to the £900 million penalty for failing to provide appropriate services to customers that could be handed out over the next five years. The company was subjected to a record fine by industry regulators two weeks ago.
Thames bondholders are pushing for OFWAT to reset our financial performance and escape the “loop of destiny” in order to waive penalties for past environmental infringements.
Creditors, including US hedge fund Elliot Management and Silver Point Capital, are proposing to inject £3 billion in stake into the Thames and win a 20% prize money on the value of the loan, according to those familiar with the group’s plans.
This will cut Thames’ debt from £2 billion to £12.9 billion, paving the way for a return to investment grade ratings, people involved in the discussion said.
A group of creditors, including more than 100 financial institutions with more than £10 billion in debt to Thames, they added, are hoping to agree to the deal next month.
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The turnaround plan involves replacing the entire utility board, and Weston is unlikely to stay in the post.
The creditors will also lend another £2 billion in addition to the expensive £3 billion loan approved by the London High Court earlier this year. Thameswater cut £750 million and gave them enough cash to survive until September.
If creditor transactions fail, other investors, including CK Infrastructure and Castlewater, have shown that they are still interested in bidding for the Thames, even if they are temporarily volunteered under a government special management scheme. The government says it is working on private sector solutions.
Thames Water said: “The Board will consider a full recapitalization and turnaround plan submitted by creditors a few weeks in advance.”
“We have begun a thorough review of submissions from a group of senior creditors. The submissions include turnaround plans, approaches to financial resilience and suggestions for governance,” Ofwat said.
