Thames Water chief in sudden departure amid struggle with £14bn debt pile

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Thames Water has introduced its chief govt Sarah Bentley is stepping down with fast impact because the UK’s largest water utility struggles with its huge £14bn debt pile.

The abrupt exit follows rising issues over the monetary stability of the corporate, which offers water and sewage providers for 15mn folks in London and surrounding areas. The federal government and regulator Ofwat are understood to be carefully monitoring the scenario.

Final yr the house owners of Thames Water, a clutch of personal fairness, pension and infrastructure funds, invested £500mn within the firm — the primary fairness injection since privatisation — and pledged an additional £1bn topic to situations. Even then they acknowledged that “additional shareholder help could also be required”.

Bentley’s sudden exit will add to fears over the corporate’s monetary resilience and lift issues that the federal government and Ofwat may have to step in.

Any monetary collapse may have a “domino impact” and lead different water corporations to topple, one chief govt of one other water firm warned. In December, Ofwat mentioned it was involved over the monetary resilience of Thames Water, Yorkshire Water, SES Water and Portsmouth Water.

Bentley, who joined Thames Water three years in the past with a £3.1mn golden whats up, shall be changed on an interim foundation by former Ofwat chief govt Cathryn Ross, who’s now director of technique and inner affairs at Thames, and finance boss Alastair Cochran. Bentley’s predecessor Steve Robertson left in 2020 with a £2.8mn pay-off.

Bentley was within the second yr of an eight-year turnround plan to sort out leakage and cut back sewage outflows into rivers, a legacy of under-investment in infrastructure.

However the firm was struggling to make progress and a freedom of data request launched this week revealed the leakage price from Thames Water pipes is the best in 5 years. The corporate is not going to meet its goal to scale back them this yr.

Bentley mentioned in a press release on Tuesday that “the foundations of the turnround that we have now laid place the corporate for future success”. Nevertheless, Bentley, who was in line for £1.6mn pay bundle, agreed in Could to forgo her bonus amid issues over the corporate’s environmental and buyer efficiency.

Like many water corporations Thames Water is beneath stress from rising inflation, together with hovering power and chemical costs and better funds on its money owed.

S&P, the score company, has unfavourable outlooks for two-thirds of the UK water corporations it charges — indicating the potential of downgrades as the results of weaker monetary resilience. Greater than half of the sector’s debt on common is inflation linked, placing stress on corporations within the present setting. 

Water corporations have been drawing up plans to extend family payments by as much as 40 per cent to handle rising prices however they’re but to be agreed by Ofwat, which is anxious about piling stress on households throughout a price of residing disaster. Water corporations will submit their enterprise plans by October with a remaining choice to be made by 2025.

Southern Water, which serves 4.2mn prospects throughout Kent, Sussex, and Hampshire, was rescued from the brink of chapter after the Australian asset supervisor Macquarie agreed to step in and take majority management of the corporate in 2021 in a secretive deal agreed with Ofwat.

Martin Younger, analyst at Investec, mentioned the chief govt’s resignation at a vital time was “suboptimal”. “The challenges going through the water trade, and sure corporations inside it, are well-known. The subsequent regulatory interval will in all probability see larger ranges of funding throughout the trade, with possible invoice implications,” he added.

Gary Carter, GMB nationwide officer, mentioned the resignation highlighted “what a dangerous scenario Thames Water is in”.

“Shareholders desperately have to put the corporate first and unlock the funds [needed] to maintain the infrastructure and workforce of this important public useful resource from collapsing,” he added.

Ofwat on Tuesday mentioned it could be “in search of assurances concerning the firm’s continued dedication and ongoing plans to enhance its operational, buyer and environmental efficiency and [its] monetary resilience”.

Ian Marchant, Thames Water’s chair, mentioned Bentley had constructed a “first-class govt crew” and led the “first section of the turnround of the corporate”. The corporate shall be trying to find a brand new chief govt, he added.