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Severn Trent boss defends multi-million pay packet despite sewage spills

May 17, 2024
in Business
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Severn Trent boss defends multi-million pay packet despite sewage spills
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Ofwat’s decision on bills is potentially make-or-break for Thames Water, which is the UK’s largest water company, with 16 million customers in London and the Thames Valley region.

Its parent company, Kemble, is owned by some of the world’s largest pension and sovereign wealth funds but it recently defaulted on debt payments. It means it is now effectively insolvent.

Kemble was supposed to pump billions of pounds into Thames Water to upgrade its facilities that supply clean water and remove waste for a quarter of the UK.

On Thursday, Michael McNicholas, a non-executive of Thames Water who represents Omer – a Canadian pension fund which is the biggest shareholder in Kemble – stepped down from the board “with immediate effect”.

Jim Wright, listed infrastructure fund manager at Premier Miton Investors, which invests in the water industry, said the departure could be the first in a series.

“I think this is part of a wider process,” he told the BBC. “We know that Kemble defaulted on a debt payment last month because the underlying shareholders were not prepared to inject any more equity and so I think this is the continuation of that process and of the owners simply walking away from the ownership vehicle.”

Thames Water is ring-fenced and regulated but has billions of pounds worth of debt. Chris Weston, who joined Thames Water as chief executive in January, has said it has enough in cash and overdraft facilities last until next May.

But if it cannot raise more money, it faces being nationalised under a measure known as special administration.

There have been concerns that if Thames Water is placed in special administration it could make investors nervous about lending money to the rest of the industry.

But Ms Garfield said: “It is quite different for us. We actually went to our investors just last October and asked them to inject money into the company and they gave us £1bn of cash so it is very, very different.

“I’m not in a position to comment on Thames but I can reassure every Severn Trent customer that we have a very healthy, very, very strong financial situation.”

Ms Garfield said that the company would invest “hundreds of millions of pounds” in “storm overflow solutions across 900 locations in the Midlands” over the year.

In it five-year plan submitted to Ofwat, external, Severn Trent wants to invest £12.9bn and increase customer bills by 35.7%.

Between 2020 and 2025, the average annual bill for Severn Trent was £402.63, for the next five years the average would be £546.35 if its business plan is accepted by Ofwat.

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