Thames Water Refuses to Return £2.5 Million in Executive Bonuses Paid From Emergency Loan

Thames Water has declined to recoup £2.5 million in bonuses paid to senior managers from an emergency loan intended to stabilise the struggling utility company’s finances. The payments, distributed to 21 managers on 30 April, represent the first tranche of a controversial compensation package worth approximately £15.7 million.

Sir Adrian Montague, Thames Water’s chair, revealed in correspondence to the environment select committee that the same managers are scheduled to receive an additional £2.46 million in December, followed by £10.8 million in June next year. The company’s management retention plan (MRP) was suspended in May after revelations that Montague had incorrectly informed MPs that creditors had demanded these payments.

The bonuses were funded through a £3 billion emergency loan carrying a 9.75% interest rate, provided by a consortium of hedge funds, banks, and investment firms. These creditors, including Aberdeen, M&G, Elliott Management, and Invesco, are now positioned as primary candidates to assume ownership of Thames Water in exchange for £5.3 billion in equity investment and debt restructuring.

Documents released by the committee expose that four executives earning up to £400,000 annually are set to receive up to £1.13 million each in retention payments, contingent upon their continued employment with the company. The board minutes suggest these payments were deliberately structured as retention bonuses rather than performance-related compensation to circumvent new legislation restricting water company executive bonuses.

Ofwat’s chief executive, David Black, expressed disappointment regarding the company’s lack of transparency, noting that the regulator was not informed of the bonus arrangements until after their distribution. The situation has sparked public outrage, particularly as Thames Water recently warned of potential hosepipe bans and continues to face scrutiny over its financial management and operational performance.

The Environment Secretary, Steve Reed, has indicated that while most of these payments may be beyond the reach of new regulations, future bonus payments to key executives, including the finance chief Steve Buck, could potentially be blocked under current legislation.