Thames Water – leaks and redundancies as owners walk away with billions
If there is one company that epitomizes the scandal of water privatisation it is Thames Water. Formed in 1974, along with nine other regional water companies, Thames Water was privatised by Margaret Thatcher’s Conservative Government in 1989. Bought by German utility company RWE in 2001 for £5 billion, it has now been sold on to Australian consortium Kemble Water Ltd for £8 million, netting the owners a profit of £3billion. This is in addition to the £1 billion in dividends it extracted over the past five years whilst saddling the company with debts of £3.2 billion.
Such sums could have gone a long way in repairing and renewing London’s aging infrastructure. However, as the priority was maximising profits, investment was kept to a bare minimum. Consequently the service provided to customers has been very poor. Despite numerous public relations campaigns and mission statements, the company has failed to meet its targets for improvements. The regulator OFWAT has regularly criticised the company for missing its leakage targets and is investigating the information the company provides as part of the discussion over charges to its customers.
Last summer, Tames Water imposed restrictions on water use during the worst drought in southern England in 70 years. It is losing about a third of its water in leaks from its water mains, the worst record in England and Wales. The company received the biggest fines for pollution, and was prosecuted for allegedly providing water unfit for human consumption. This catalogue of failure led the Independent newspaper to label Thames Water “Britain’s most hated company.”
The response of the company to this crisis was to announce plans to cut a quarter of its 4,000 workforce within three years. The inevitable consequence of such a huge staff cut will be the further deterioration of an already poor service. However, this was not in the minds of the directors. Their primary objective was to cut costs to make the company more attractive to a potential buyer.
Of course, the cost cutting did not apply to them. The outgoing chief executive received a total package of £2.7 million for the year. Other directors saw their bonuses increase from £228,000 to £615,000, with the total remuneration of the four executive directors up 62 percent at £1.26 million. They made as much as £30 million from the sale.
Before the selloff OFWAT officials had
instated that they had “secured a legally binding undertaking from Thames
Water to replace additional leaking water mains at the expense of its shareholders”.
It is now clear that the expense has fallen on Tames Water’s workers and
its customers, while the former owners have walked away with a fortune.