Thames Water bonuses may very well be blocked by regulator Ofwat

Thames Water and different water corporations may very well be prevented by the trade regulator from paying any bonuses, beneath guidelines resulting from come into impact subsequent month.

Surroundings Secretary Steve Reed mentioned new measures would cease water corporations dumping a “tidal wave of sewage into our rivers whereas pocketing thousands and thousands of kilos of bonuses”.

Regulator Ofwat has been capable of cease companies utilizing buyer cash to fund bonuses, however the brand new guidelines imply they might not use funds from shareholders or lenders both.

Nonetheless, in a press release Thames, which lately agreed a £3bn rescue mortgage, mentioned it was not paying performance-related bonuses however as a substitute “retention funds”, which weren’t coated by the brand new guidelines.

Thames Water is the UK’s greatest water firm, serving a few quarter of the UK’s inhabitants, however has come beneath hearth in recent times.

It has enormous money owed and is struggling to repair leaks, sewage spills and modernise outdated infrastructure.

The corporate has estimated it may very well be fined as much as £900m over the subsequent 5 years for leaks and sewage spills.

Earlier this yr, it secured £3bn in emergency funding, which it mentioned would give it the area wanted to finish a restructuring of its money owed and appeal to a money purchaser.

Subsequently it picked US personal fairness large KKR as its “most popular accomplice” to purchase the agency.

Below its new powers contained within the the Water (Particular Measures) Act, Ofwat will be capable of ban “undeserved bonuses when excessive requirements on the setting and monetary administration of water corporations usually are not met”.

It may imply that Thames Water’s bonuses may very well be blocked as quickly as subsequent month.

The ban would even be retrospective, that means bonuses paid within the final monetary yr may very well be clawed again.

The Division for Surroundings, Meals and Rural Affairs (Defra) mentioned clients “mustn’t pay the worth for water firm mismanagement” and that it was “demanding an enchancment in efficiency”.

It mentioned companies could be judged every year on 4 measures – environmental efficiency, shopper issues, monetary resilience and prison legal responsibility.

Bonuses could be “prohibited if [the water companies] fail to fulfill acceptable requirements”.

“The federal government will ban the fee of unfair bonuses for polluting water bosses,” Reed mentioned. “The times of benefiting from failure are over.”

Earlier this week, Thames chairman Sir Adrian Montague advised MPs that tons of of hundreds of kilos value of latest bonuses for bosses had been justified.

“We stay in a aggressive market and we have now to offer the best type of packages to those individuals in any other case the pinnacle hunters come knocking,” he mentioned.

Sir Adrian mentioned prime executives may get thousands and thousands of kilos in bonuses as a part of the emergency mortgage settlement.

In a press release, a Thames spokesperson mentioned the corporate was concerned in a “complicated turnaround and restructuring course of” to “ship higher outcomes for our clients and the setting and search a long-term resolution to our monetary resilience”.

“It’s important that the enterprise retains the individuals finest positioned to ship the improved outcomes our stakeholders rightly count on.”

Thames mentioned the funds weren’t performance-related bonuses coated by the brand new guidelines, however as a substitute “retention funds”.

It mentioned none of those retention funds could be be funded by clients.

Final November, Ofwat blocked three water companies – together with Thames, Yorkshire Water and Dwr Cymru Welsh Water – from utilizing buyer cash to fund a complete of £1.6m in bosses’ bonuses.

It mentioned that by stopping clients from “paying for undeserved bonuses”, it was trying “to sharpen govt mindsets” and to push companies to enhance their cultures of efficiency and accountability.