Thames Water has pushed back a controversial plan to award its senior bosses retention bonuses totalling £2.5 million, sidestepping a potential public outcry in the run-up to Christmas. The move comes as the heavily indebted company races to secure a multibillion-pound financial rescue package.
Bonus Payments Paused After Chair's Misleading Statement
Sources within the UK's largest water company confirmed that the contentious payment package for 21 senior executives, which was scheduled for this month, will now remain on hold until the new year. This deferral follows a significant row earlier in 2024, when The Guardian revealed that the company's chair, Sir Adrian Montague, had provided incorrect information to a parliamentary committee.
Sir Adrian had told the Environment, Food and Rural Affairs Select Committee that the company's creditors had "insisted" on the "very substantial" bonuses, which could reach up to 50% of an executive's salary, to retain key staff. He later apologised for this inaccurate statement.
Frustration and a Legal Loophole
It is understood that Thames Water's leadership has been frustrated by the inability to pay these bonuses, arguing that low morale at the struggling firm has made it difficult to retain essential staff. While the former Environment Secretary, Steve Reed, pledged to block bonuses funded by an emergency government loan, a legal technicality has provided a path for the payments.
The Water (Special Measures) Act, passed in May, only prohibits performance-related pay for top executives like the CEO and CFO. Because the awards in question are classified as retention payments, they fall outside the scope of this ban.
High-Stakes Financial Rescue and Creditor Demands
The bonus controversy is set against a backdrop of a desperate financial crisis at Thames Water. The first tranche of these retention payments, also nearly £2.5 million, was paid to managers in April, with the company stating it had no intention of clawing that money back. Further payments of the same amount were due in December, with a collective £10.8 million scheduled for June 2025.
These payments have drawn criticism because they are sourced from a £3 billion emergency loan secured from Thames Water's class-A creditors—a group of hedge funds, banks, and investment firms including Aberdeen, M&G, Elliott Management, and Invesco. This loan carries a high interest rate of 9.75% plus fees.
These same creditors are now the leading contenders to take formal ownership of Thames Water. In return for a further £5.3 billion in equity and debt investment, they are attempting to negotiate a deal with the government and regulator that would allow the company to escape hundreds of millions in environmental fines and obligations. The alternative could see the utility placed into special administration or temporary nationalisation.
The crisis escalated after US private equity firm KKR withdrew from a rescue deal, forcing the existing creditors to step in to avert collapse. Thames Water declined to comment on the latest developments.
