Committee publication · Correspondence · 9 July 2025
Correspondence from Thames Water regarding its Management Retention Plan and ownership, dated 23 June 2025
From: Environment, Food and Rural Affairs Committee
Inquiry: Reforming the water sector
Summary
Thames Water Chairman Sir Adrian Montague writes to the EFRA Committee Chair on 23 June 2025, responding to questions about the company's Management Retention Plan (MRP) and ownership prospects. The letter defends the MRP as a stability tool during restructuring, clarifies that MRP payments (£2.46 million made 30 April 2025, with further tranches paused pending Ofwat guidance) are funded by creditors not customers, and updates on the failed KKR bid and continuing creditor-led recapitalisation discussions.
Key findings
- MRP designed as retention tool not performance reward; 21 senior staff eligible (across salary bands £101k–£500k+); first tranche of £2.46m paid 30 April 2025 following super senior funding receipt; scheme now paused pending Ofwat guidance on Water (Special Measures) Act 2025 compliance.
- MRP funding confirmed to originate from new super senior facility, not customer bills; represents 0.1% of Thames Water's regulatory capital value; external benchmarking (Mercers, Willis Towers Watson) conducted over five months; Mercers paid £9,780 plus VAT.
- KKR withdrew as preferred bidder 2 June 2025 citing concerns over final investment committee approval; cited press reports suggest political risk and negative rhetoric about Thames Water influenced decision; creditor-led alternative proposal now being advanced with Ofwat and Government.
- Company has £480m cash available funding operations through July 2025; first tranche of £1.5bn super senior facility expected to cover liquidity through mid-December 2025 subject to conditions being met or waived; discussions ongoing on next drawings and extension.
- Board offers private detailed discussion with Committee Chair on current recapitalisation status rather than releasing historic Board minutes on KKR proposals, citing risk of market-sensitive disclosures being out of sync with fast-moving negotiations.
Tone
ProceduralTopics
Key actors
Sir Adrian Montague, Alistair Carmichael MP, Chris Weston, Ian Pearson, KKR, Ofwat, Thames Water senior creditors, Varun Chandra
Notable line
“… make the MRP payments, demonstrating the funds come from the new super senior facility and not from customer bills.”
Key Quotes
“The MRP has been designed as a retention tool, rather than to reward performance.”
“It is essential that we identify, recruit and retain the highest calibre of talent with the skillset to deliver the transformation required for Thames Water, acknowledged as being one of the most complex turnarounds that will take at least 10 years to complete.”
“The aggregate amount paid under the MRP on 30 April 2025 was £2,460,203. The same amount would be payable in December 2025 (at the latest) and £10,840,810 would be payable in June 2026, assuming all participants remain eligible for payments.”
“Beyond saying it was not in a position to proceed, KKR did not expand on its reasons for withdrawing.”
“The Board therefore continues to take forward the creditor-led proposal.”
Source · parliament.uk record ↗