How will you rescue Thames Water? MPs seek answers from chairman
After a stellar career helping to oversee companies on behalf of the government, or sitting on high-profile boards, Sir Adrian Montague finds himself in front of MPs on Tuesday to explain how he is going to pull off his biggest coup yet.
The 77-year-old chairman of Thames Water has been called before the environment select committee of the Commons.
The question is: just how does he rescue Britain’s largest privatised water monopoly, which is in a financial and regulatory crisis, is £20 billion in debt, has no shareholders after the last lot withdrew their support and has one of the worst records on pollution, leakage and customer service?
The Treasury wants to stop Thames Water being renationalised via a special administration regime in which the company would fall into the hands of outside accountants, with its debt sitting in the public accounts.
That is why Montague was parachuted on to the board of Thames nearly two years ago. His bona fides include a career first as a City lawyer and then as a merchant banker, roles at the top of troubled privatisations such as Network Rail and British Energy and chairmanships of Aviva, 3i, Manchester Airports Group and Anglian Water.
Whether history will be kind about Montague’s chairmanship of Thames Water is yet to play out. Here are some of the questions that MPs will want answers to.
MPs will want answers from Sir Adrian Montague on questions such as the company’s ownership and its survival prospects
PA
Who is really running Thames Water?
It has a chief executive, Chris Weston, formerly of British Gas, who has been there since January 2024 trying to fix Thames Water’s operational problems. The company also has a chief restructuring officer, Julian Gething, an accountant on an apparently short-term tenure to oversee the financial restructuring of the business.
But it is a company that has no shareholders. The coterie of international investors that used to own Thames Water, including state-backed Chinese and Abu Dhabi agencies, walked away from it 15 months ago, declaring the company uninvestable, refusing to put in the £3.5 billion they had pledged and writing off their losses.
The answer to who is actually pulling the strings appears to be a cadre of creditors, some of whom include bottom-fishing dealers in distressed debt: faceless new super-senior debtholders that have pledged up to £3 billion in bridging loans.
• Thames Water creditors emerge as a potential fifth bidder
The Thames at Abingdon in Oxfordshire: the waters have not been calm for the utility
UCG/GETTY IMAGES
Who will own Thames Water in the future?
It appears to be the infrastructure arm of KKR, a US private equity behemoth with an unkind reputation. The Thames board is in exclusive talks with KKR, which is promising to put £4 billion into the company in equity and take control.
What that means for the creditors has yet to be ascertained. There is an assumption that those holding Thames debt will have to, in the argot, take a haircut: write off large portions of their investment. There is also an assumption that super-senior creditors will want to swap their debt for shares in the company, potentially taking a sizeable equity stake for no new cash.
Is this a positive outcome?
Maybe; maybe not. KKR’s infrastructure arm is in the business of making a financial return for its employer. The firm has no experience of actually running a British water utility.
Can Thames survive with the money promised by debtholders and KKR?
A moot question. The company has said that the five-year regulatory and funding settlement conferred upon it earlier this year by Ofwat is not enough. It wanted to increase customer bills by 53 per cent, before inflation, through to 2030. The regulator said it could have 35 per cent, which adds up to a multibillion-pound shortfall. All that is before the rolling up of fines and penalties for the utility’s operational failings.
Thames Water rejects Ofwat ruling on £588 average bills
Any other matters?
The MPs have said they want to know about Thames Water’s leadership and culture, what sort of bonuses executives and other board members can expect and the returns that investors want. Montague has always promised transparency. On Tuesday, in committee room 6 of the Palace of Westminster, he will have the chance to be as good as his word.