Thames Water has postponed awarding £2.5m in retention payments to 21 senior executives until the new year, avoiding a pre-Christmas controversy as the struggling utility seeks a multibillion-pound rescue deal. The bonuses, originally due this month, were put on hold earlier this year after the company's chair, Sir Adrian Montague, admitted to misleading Parliament over creditor demands for the payments.
The retention payments, which are not covered by the recent Water (Special Measures) Act ban on performance-related bonuses for top executives, aim to retain staff amid low morale at the heavily indebted company. A first tranche of nearly £2.5m was paid in April, with further payments of £10.8m collectively due next June. Thames Water has said it has no intention of clawing back the April bonuses.
The payments are funded from a £3bn emergency loan secured by class-A creditors, which include hedge funds and investment firms like Aberdeen, M&G, Elliott Management, and Invesco. The loan carries a 9.75% interest rate plus fees. These same creditors are now the leading contenders to take over ownership of Thames Water in exchange for an additional £5.3bn in equity and debt.
Environment committee chair Alistair Carmichael said: “It’s important that the focus of Thames management is on turning round the company and not on rewarding staff and having to handle negative headlines. The public is rightly furious at the prospect of senior staff in a company with the performance record of Thames receiving bonuses.”
Thames Water is racing to secure funding and persuade regulators to ease environmental fines or face potential renationalisation. The class-A creditors are pushing for a recapitalisation deal that would allow the company to bypass some environmental obligations, with the alternative being special administration.
