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Thames Water turns on pay taps - The Times
Posted: 12 June 2012
by Robert Lea / Industrial Editor
Executives at Thames Water have more than doubled their pay through bonuses and perks while its array of mostly foreign shareholders have received a bumper lift in dividends — all despite falling profits, worsening customer satisfaction and soaring bad debts.
Britain's biggest water company, supplying London and the Home Counties, reported a 12 per cent slump in profits to £182 million in the year to the end of March, even though rising household bills brought a 4.4 per cent growth in revenues to £1.69 billion.
It blamed the profits fall on a rising interest-rate bill — £25 million more than in the year before — as its corporate debts leapt from £6.7 billion to £7.7 billion to pay for infrastructure upgrades.
It also pointed to a leap in bad debts from £38 million to £70 million in the year, the result of "the ongoing impact of the economic downturn" as households failed to pay bills.
It admitted that customer satisfaction levels had fallen sharply, to a score of 62.6 from 65.2, while incidences of pollution had risen by nearly 40 per cent by 75 to 268, with 20 considered to be serious.
Despite the falling profitability, payments of dividends to shareholders rose 33 per cent to £200 million during the year, with a further £92 million paid out in another interim only last week.
Thames is owned by a number of international funds. Its oldest shareholder consists of funds managed by Macquarie, the Australian finance house. More recently, other significant shareholders have joined the investors enjoying the strong yield in dividends at Thames, including China Investment Corporation and the BT pension fund — although the company has refused to disclose how much its new investors have paid for their stakes. Other shareholders include the Abu Dhabi Investment Authority and investment and pension funds from Canada, Australia and the Netherlands.
Thames' executives have had a good year. Martin Baggs, the chief executive, received a total of £896,000 in the year and bonuses and other perks, including a £3,000 per month housing allowance, inflated his pay packet above his £425,000-a-year basic. Thames accounts indicate he should qualify for a £446,000 payout from the company's long-term investment plan this year. The company's chief operating officer Steve Shine, who has since quit the company, increased his total pay for the year by 15 per cent to £709,000.
The company defended the payouts : "Our executive reward packages are benchmarked with those at other similar-sized organisations," it said in a statement. "We are a FTSE 100-sized company, which serves water to 8.8 million people and treats the sewage of a quarter of the country's population.
"Bonuses are only awarded if we hit our operational and regulatory targets — for example, leakage-reduction goal hit six years in a row; 100 per cent compliance maintained at all our sewage works; best tap water quality of all the major suppliers. If these targets are missed, then bonuses are not awarded, as was the case in 2006-07."