Taunton MP in LaLa land?
Yesterday in response to a question from Labour MP Dan Walton, Rebecca Pow addressed the House of Commons. He asked her about the financial resilience of water companies. Responding in her capacity as Minister State for Environment, Food and Rural Affairs she said: ” The sector as a whole is financially resilient. Water companies are responsible for ensuring that they remain financially resilient, however, over recent years, as investment requirements have risen, Ofwat has taken further steps to strengthen the financial resilience of companies. This includes increasing its financial monitoring, improving levels of reporting transparency and strengthening the ring-fence licence conditions, which ensure the regulated company maintains sufficient financial and management resources which enable it to carry out its functions in a sustainable manner.“
Government and Ofwat take the financial resilience of the water sector very seriously. Government gave new powers to Ofwat through the Environment Act and in March 2023, Ofwat set out new measures to increase financial resilience in the sector. This includes additional powers to stop water companies making dividend payments earlier if the company’s financial resilience is at risk….
She added that: “In addition, Ofwat has also tightened up the measures around water company executives’ bonuses so that Ofwat will make shareholders pay for bonuses, not the customer, where there is poor performance.”
This was in the same week that Chief executive Sarah Bentley and chief financial officer Alastair Cochran were awarded bonuses. Bentley was awarded £496,000 in remuneration linked to performance, Mr Cochran was awarded £298,000. The fact that both are minded not accept them is not the point. What is the point is that Pow and Ofwat failed to stop the award in the first place.
Why should they not have bonuses? Mainly because Thames faces financial difficulty. Despite the warm fuzzy words of the Minister. Between 2006 and September 2022, Thames Water’s debt pile grew from £3.2bn to £14.3bn. Most of its borrowing was taken out against its assets. Thames is widely rumoured to have a £10bn blackhole in its balance sheet. Attempts to raise equity to plug the gap have to date been unsuccessful.
This presumably is an example of the financial resilience Pow was speaking of in the Commons.