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Thames Water argues that executives are entitled to pay a favorable “fixed payment” to set up a utility plagued by a conflict course with a minister who agrees to an urgent £3 billion loan and is determined to block the award.
A government spokesperson said Friday that Thames will step in if water continues in attempts to maintain “outrageous” payments after the company argued that new laws designed to prevent controversial bonuses could be circumvented.
“This is a crude attempt to play the masses for fools and hide corporate greed. If the Thames boss attempts to plunder the company for personal gain, this government will not stand blankly,” a government spokesman said.
“The days of profiting from failure are over. We take the necessary actions to stop these outrageous payments.”
The minister said the water regulator hopes Thames water will block the award from handing over to senior executives as a reward to secure a £3 billion loan.
However, Thames Water told the Times of Finance that payments are “retention payments,” so they will not be covered by OFWAT’s new authority. Awards are up to half of the year’s salary – on top of executive salaries and other bonuses.
The retention bonus is not subject to the Water Act, as it is not performance-related, the company said.
“It is important for businesses to retain the best people to deliver improved results that our stakeholders expect correctly,” a utility spokesman said Friday.
Thames Water’s rebellious stance on Friday sparked anger within Whitehall, with one official saying it was “authorising” for the company to assert that “retainment payments” were not a form of performance-related wages.
Thameswater, the UK’s largest water company, has become a lightning bolt of mass outrage as it seeks to dodge religion under the government’s special administrative regime.
The company, which serves about a quarter of the country’s population, is struggling with the weight of its 20 billion pound debt mountain and has exclusive discussions with private equity firm KKR to take over its business.
The utility was at risk of running out of money before securing a £3 billion loan (challenged in court by rival bondholders) from U.S. hedge funds such as Elliott Management and Silver Points.
Thames Water refused to say who would receive the payment and exactly how much it was worth.
Chief executive Chris Weston, who fired fire after accepting a £195,000 bonus in his three-month work last year, is not one of those who received the retention payments, Thames Water said.
If the government pushes for plans to limit bonuses, the company has already threatened to raise executive base salaries. The scale of the retention payments was revealed at a Commons Committee hearing on Tuesday by Utility Chairman Ir Adrian Montague.
OFWAT will receive new authority starting next month and prohibit “unfair bonuses” that have not met the water company’s environmental and financial management standards. These long-awaited powers are retroactive for fiscal year 2024-25.
Talks on the new bonus rules are still underway, but the Minister hopes they will be introduced by June.
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Previously, OFWAT had no explicit authority to ban or suppress executive bonuses, but it could do so, such as ensuring that the company is financially resilient, if this helps to fulfill its duties.
However, the recently passed Water (Special Measures) Act aims to give companies the power to remove bonuses that do not meet certain standards regarding the water company’s “consumer issues,” “environment,” or “financial resilience.”
“We’ve been working hard to get the better of our customers,” said Ofwat. “We are urgently requesting information on the provision of retention bonuses to urgently request information from Thames Water on comments made before the Environment, Food and Rural Affairs Committee earlier this week.”
