Thames Water chair may face questions on bonuses

Thames Water chair may face questions on bonuses
Credit: House of Commons/PA

UK (Parliament Politics Magazine) – Sir Adrian Montague told MPs lenders demanded hefty bonuses from a £3bn loan to retain staff, sparking backlash as Thames Water faces debt and regulation.

As reported by The Guardian, Thames Water’s chair may face further inquiries after claims that creditors demanded large bonuses for senior bosses from a £3bn emergency loan.

Thames Water chair faces scrutiny over bonuses from £3bn loan

The Thames Water chair may face further scrutiny after claiming creditors demanded hefty bonuses for senior executives from a £3bn emergency loan.

At last week’s Efra select committee, Sir Adrian Montague stated lenders demanded “significant” bonuses worth up to 50% of salary. These bonuses were funded by the emergency loan to retain essential executives.

The planned bonuses triggered anger, with the company revealing its financial condition was “hair-raising” and admitting it was “very close to running out of money entirely.”

According to sources and court papers, the creditors approved the bonuses but did not originally propose them.

Insiders close to Thames claim the company’s executives pushed for retention incentives. They added that all final decisions were made by a board committee responsible for pay.

The loan agreement allowed for retention bonuses but did not require them. Lenders confirmed that releasing the loan was not conditional on bonuses being paid to Thames executives.

Sources say Montague will not receive any of the retention bonuses paid to senior staff.

What did Adrian Montague tell the Efra committee about executive bonuses?

Addressing MPs, Montague described senior staff as “the most precious resource” and claimed that creditors had requested the retention payments.

He said, “To be honest, this is the first time that I have encountered this. I have done a few reconstructions in my time, and I do not think we would have got there but for the fact that the lenders insisted, should we say.” 

Montague stated that the payments linked to the £3bn loan “will be funded by the lenders” and not customers.

What did the High Court Judge say about Thames Water’s bonus plan?

Justice Leech, in a February court ruling, highlighted that Thames’s ex-finance chief, Alastair Cochran, stated the retention scheme was managed internally by the board and the overseeing committee.

The judge ruled that the court saw no proof that lender approval was required for the retention schemes.

What did Thames Water say about its retention plan and financial turnaround?

A Thames Water spokesperson stated in a statement, “Thames Water is progressing a complex turnaround and restructuring process so we can deliver better results for our customers and the environment and seek a long-term solution to our financial resilience.”

They added, “During our liquidity extension discussions it was agreed that a retention plan was important to retain the people best placed to deliver the improved outcomes our stakeholders rightly expect during this current period of uncertainty and this was reflected in the term sheet we agreed with our creditors on 25 October 2024.”

What did Alistair Carmichael say about Thames Water bonuses?

Alistair Carmichael, the chair of the Efra committee, stated, “This is a serious matter which my committee will look at carefully. The government has already stated it expects Ofwat to block the bonuses discussed in our hearing with Thames Water last week. We look forward to discussing these and other developments relating to the water sector in our evidence session with the secretary of state on Tuesday.”

What could the government’s new bill mean for Thames Water bonuses?

Britain’s biggest water firm is racing to secure new funding. It must persuade regulators to drop massive fines or risk being renationalised.

After winning a court ruling, the firm secured approval to take the loan. The loan carries a steep 9.75% interest rate plus additional fees.

According to The Guardian, the new water bill gives Ofwat authority to block bonuses for executives of failing companies, potentially blocking these payments first. Thames Water stands on the brink of collapse, overseeing record sewage spills and burdened by heavy debt.

Beth Malcolm

Beth Malcolm is Scottish based Journalist at Heriot-Watt University studying French and British Sign Language. She is originally from the north west of England but is living in Edinburgh to complete her studies.