(qlmbusinessnews.com Thurs. 21st Nov, 2024) London, UK —
Regulator Ofwat to Oppose Thames Water CEO Bonus Paid by Customers.
UK water regulator Ofwat is expected to intervene against Thames Water funding a £195,000 bonus for its CEO, Chris Weston, through customer bills. Instead, Ofwat is anticipated to insist that such payments be financed by the company’s owners or lenders.
Chris Weston, who joined Thames Water in January, earned a £195,000 bonus within his first three months, boosting his total remuneration to £437,000. The company, however, faces a dire financial situation with £18 billion in debt and predictions that it could run out of money by Christmas unless urgent action is taken. Weston previously warned that Thames Water has enough cash to last only until May 2024.
Ofwat Takes a Stand on Executive Pay
The regulator’s announcement will form part of a broader update on executive remuneration and financial resilience within the water sector. Ofwat recently gained powers to prevent bonuses funded through customer bills when companies fail to meet environmental or performance targets. Thames Water has not confirmed whether Weston’s bonus has already been paid, but Ofwat is expected to make it clear that such payments must not come from customer funds.
Some water companies, such as Southern Water, have pre-emptively agreed that bonuses will be funded by shareholders rather than customers. However, Thames Water’s situation is unique, as its shareholders effectively walked away earlier this year following disputes over bill increases.
Thames Water’s Mounting Financial Crisis.
The company’s owners withdrew promised cash injections after Ofwat rejected requests for a 44% above-inflation increase in customer bills over the next five years. Ofwat instead approved a preliminary rise of 21% above inflation, which shareholders found insufficient. Thames Water is now under the control of its lenders, who have offered a £3 billion loan at high interest rates to keep the company afloat temporarily.
The lenders are finalising restructuring plans that could involve discounted debt repayments, new management expertise, or even a breakup or public listing of Thames Water.
Environment Secretary Steve Reed reiterated yesterday that nationalisation is not on the table, citing the billions of pounds and years required to bring the company into public ownership. Reed has instead commissioned an independent review of the water sector, led by Sir John Cunliffe, with findings expected in June 2024.
The final determination of water bill increases for the next five years will be announced on 19 December.
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