Results revealed losses at Britain’s biggest water company rocketed last year – as bosses were given another grilling by MPs
Crisis hit Thames Water has been accused of “holding a gun” to taxpayers’ heads over an expected £1billion in fines for widespread failures.
The company is lobbying the government to changes industry rules which see supplies punished for missing targets for tackling pollution and leakages. Top Thames Water bigwigs told MPs the company was braced for an estimated £1billion of penalties over the next five years. But they argued this would hamper investment, especially given the £20billion regulator Ofwat has allowed it to invest is far short of the £24billion it wanted. Customers bills will still soar as a result.
Thames is trying to get approval for a rescue involving existing creditors that would avoid its temporary nationalisation – through what is called a special administration regime – after US private equity giant KKR ditched a takeover last month.
MP Helena Dollimore, a Labour committee member, claimed Thames was “asking to be let off the hook.” She went on: “Are you not holding a gun to the government’s and the taxpayers’ head? It is basically saying you’ve got to let us off the fines or you will have a special administration regime”.
Chris Weston, Thames’ chief executive, insisted: “We are reflecting the reality of the situation. We are asking for a reset because there isn’t really an alternative.’ He argued: “The operational performance of the company will not meet the targets that were set by Ofwat and that will lead to penalties of about we estimate £1billion.” He claimed any change to the current system would benefit other suppliers too.
It came as Mr Weston and Thames chairman Sir Adrian Montague were hauled back before the Environment Select Committee to answer further questions and because of MPs concerns about previous evidence. They included details Sir Adrian gave last time around retention payments – seen by many as a bonus – to deter a group of just over 20 senior bonuses from leaving that was linked to a £3billion bail-out from its creditors. The scheme – worth more than £18million – could have seen they bag three times their salary. It was paused amid criticism, but not until after a first tranche of payments were made.
MPs criticised the paying of bonuses to top managers while rank-for-file are under huge strain. Thames is short of 700 engineers after staff left.
The hearing was told KKR has not given the Thames board a reason why it has pulled out of a potential rescue deal. Thames had been slammed for opting to enter exclusive talks with KKR, despite there being others interested in a deal. The committee has asked for board minutes relating to the takeover but the company has so far refused to hand them over, triggered a potential spat.
It came as the more details about the dire state of Thames’ finances were laid bare. Sir Adrian told MPs it was being “kept alive” by money from its creditors, who are now in pole position to seize control of the business through a debt-for-equity deal. Mr Weston warned the creditors’ plans – which could involve a total £17billion – would take between 10 and 15 years to complete.
Sir Adrian said: “I joined about two years ago. We had a crisis and we have been living in crisis mode ever since.” He added: “I don’t think there has ever been a situation like Thames ever.”
Thames earlier released results revealing it plunged to a massive £1.65billion annual loss. Losses ballooned from £157million to previous year as it wrote off a huge loan dating back to its controversial previous ownership under Australian bank Macquarie. Thames’ debts soared under Macquarie and now stand at £16.8billion.
The results come after Thames announced a hosepipe ban for more than a million homes would come into force next week because of the drought conditions.