Thames Water applies for fresh bill rise

Thames water bill rise: who is owed the £17bn The consortium chasing repayment is not a group of small savers. It is led by distressed-debt specialists, Apollo Global Management, Elliott Management, Farallon Capital Management and Silver Point Capital among them, funds that built their business models on buying up the debt of companies in trouble and extracting value when the trouble arrives. They bought into Thames Water’s £21bn debt pile knowing exactly what kind of leverage that debt would give them if the company failed. It has failed, and they are now retaining Pallas Partners alongside their existing adviser Akin Gump to make sure that whatever happens next, the public purse absorbs the cost, not them.

Mike McTighe, the Openreach chairman tipped to become Thames Water’s next chair if the consortium’s rescue proceeds, put it in the language of partnership: the consortium is “keen to meet new ministers as soon as possible” and says it remains “ready and willing to recapitalise Thames Water, return it to investment grade.” That is the sound of a fund manager managing risk. It is not the sound of a company answerable to the people who depend on it for clean water.

Bonuses up while service fails

Thames Water’s own annual report, published in mid-July, shows why customers have little patience left. Bonus and retention payments to senior executives totalled £4.09m in the year to March, up from £2.8m the year before. Chief executive Chris Weston’s total pay rose to £1.16m, including a £99,000 deferred retention payment. Ofwat’s power to claw back bonuses applies only to chief executives and finance directors, so Thames simply routed the money through other board members instead, a loophole rather than an oversight.

Environment Secretary Emma Reynolds called the payouts “outrageous,” saying it was wrong for one of the worst-performing water companies in the country to hand out bonuses and inflation-busting pay rises. Weston’s defence was that “bills alone cannot fund the required investment” and that recapitalisation “is taking longer than originally expected, because of its scale and complexity.” Customers facing a second bill rise this year, after complaints doubled and pollution incidents at the company more than doubled the year before, are entitled to ask why the money for bonuses was found first.

What Burnham is actually weighing

Reynolds has already thrown doubt on the consortium’s preferred rescue once, writing to Ofwat in June to warn that “consumers will ultimately bear an undue cost” from the regulatory relief Thames Water and its creditors were seeking, including a four-year waiver on new sewage-related fines and changes to the risk-sharing mechanism that penalises poor performance. CityAM has reported that Reynolds had not personally met the consortium’s investors before raising those objections; officials had.

Burnham told the Guardian last month that “greater public control” of Thames Water could mean nationalisation, and is reported to be planning a special administration regime once he takes office. An SAR would let the state take over Thames Water’s operations, but the creditors say it could cost the taxpayer £2bn. One ally of Burnham’s, quoted in the Sunday Times, argued that if the taxpayer is paying £2bn to keep the company running, “the taxpayer needs to receive something in return.” That is a fair statement of the actual choice in front of an incoming prime minister: a market rescue that protects the consortium’s return, or a state takeover that costs the public money up front but ends 37 years of a company being run for its creditors first and its customers second.

The bill for rescuing them either way

The consortium’s own defence is that its plan is a “solvent restructuring,” recovering only what is owed rather than delivering a windfall, and avoiding a taxpayer-funded administration altogether. That is a real distinction, and it deserves stating plainly rather than dismissing. It is also true that an SAR carries a genuine fiscal cost, and that money spent stabilising Thames Water is money not spent on the NHS or anything else a Burnham government will be judged on. Some in his own camp are reportedly wary of the price tag for exactly that reason, and of the argument that a nationwide funding model would in effect ask taxpayers in Manchester and the north to help cover a London and south-east infrastructure failure.

None of that changes who created the debt in the first place. Thames Water has extracted profit for shareholders for 37 years while pollution incidents doubled and complaints kept rising, and the funds now demanding repayment bought into that structure with their eyes open. Polling by We Own It in April found more than eight in ten people in England want water back in public hands. Its lead campaigner, Sophie Conquest, put it plainly: “People are absolutely sick of paying more and more for a broken water system, all while watching as shareholders continue to extract eyewatering profits.” An early day motion calling for Thames Water’s public ownership is currently live in the Commons, following a debate on the company’s future in January.

Whatever Burnham decides, the choice is not between a costly rescue and a free one. It is between a rescue that pays Elliott Management and Apollo Global Management first, and one that pays the people who actually drink the water.