Severn Trent's chief executive, Liv Garfield, has defended her multi-million pound compensation package despite a significant increase in sewage spills by the company in 2023.
Last year, Garfield received £3.2 million in salary, bonuses, and shares, accumulating nearly £13 million over the past four years.
Severn Trent was accountable for over 60,000 sewage spills last year, an issue Garfield admitted on the BBC Today programme, saying, "doesn't make me feel good." However, she highlighted that Severn Trent has "made massive progress on river quality" over the past few years.
The water industry is facing heightened scrutiny regarding the quality of Britain's water following multiple sewage spillages. Sewage encompasses everything that goes down household drains, including from toilets, personal washing, and domestic cleaning activities, as well as run-off from roads. The warmer winter and wet weather have overwhelmed mainly roadside grills.
Water companies argue they need additional funds to upgrade their infrastructure to reduce leaks. The upcoming weeks are crucial as they will determine potential increases in customer bills. For instance, Thames Water is seeking to raise bills by 44% over the next five years to finance investment.
Industry regulator Ofwat will soon decide on bill increases for 2025-2030, with draft proposals expected on June 12.
Ofwat's decision is critical for Thames Water, the UK’s largest water company, serving 16 million customers in London and the Thames Valley. Its parent company, Kemble, owned by major pension and sovereign wealth funds, recently defaulted on debt payments, rendering it effectively insolvent. Kemble was supposed to invest billions into Thames Water to enhance its facilities.
Recently, Michael McNicholas, a non-executive of Thames Water representing Omer, the largest shareholder in Kemble, resigned from the board. Jim Wright, infrastructure fund manager at Premier Miton Investors, suggested this might be the beginning of a broader process of shareholders withdrawing support, following Kemble's default on a debt payment.
Thames Water, though ring-fenced and regulated, carries substantial debt. CEO Chris Weston, who joined in January, indicated the company has enough cash and overdraft facilities to last until next May. Without additional funding, it faces potential nationalization under special administration.
There are concerns that Thames Water's potential special administration could deter investors from the broader water industry. However, Garfield reassured that Severn Trent's situation is different. "We went to our investors last October and secured £1 billion in cash, so we are in a very strong financial position," she stated.
Garfield added that Severn Trent plans to invest "hundreds of millions of pounds" in "storm overflow solutions across 900 locations in the Midlands" this year. In its five-year plan submitted to Ofwat, Severn Trent proposes to invest £12.9 billion and raise customer bills by 35.7%.
From 2020 to 2025, the average annual bill for Severn Trent was £402.63. For the next five years, the average would rise to £546.35 if its business plan is approved by Ofwat. Photo by BlueandWhiteStripes, Wikimedia commons.