Thames Water quits the Cayman Islands
New chairman ditches tax haven to clean up firm’s tarnished image
THAMES Water is severing links with the Cayman Islands in a bid to shrug off a reputation for tax dodging.
The foreign-owned firm plans to close its two subsidiaries in the offshore tax haven as part of a review under a new chairman.
Thames insists the Cayman companies do not help it cut taxes, but concedes they do not help transparency at a time of huge criticism.
It has been under fire for years for paying vast dividends to its owners while polluting UK waterways, loading up on debt and paying no UK corporation tax.
The water regulator is now ramping up pressure, accusing water companies of facing a huge crisis of public trust amid murky finances and high bills.
Thames is reviewing its strategy under new chief executive Steve Robertson, after Australian bank Macquarie sold out earlier this year. Yesterday, Thames, which serves 15m customers in London and the Thames Valley, appointed Ian Marchant, the former chief executive of energy firm SSE, as independent chairman.
Bosses said: ‘He will lead a review of Thames Water’s corporate structure and governance to ensure that it is as simple and transparent as possible for its customers and stakeholders.’
Thames’ two Cayman Island companies are part of a complex structure of nine companies in group. It, and other water companies, set up subsidiaries in the Cayman Islands in the early 2000s to raise cash on the bond markets when they could not do so in the UK at the time.
Rules have since changed but Thames and other firms have carried on using the subsidiaries to sell bonds.
Thames stresses that the firms are fully resident in the UK for tax purposes.
But critics say the structure makes it hard to hold the firm to account. The arrangement has also helped it rack up £10.5bn of debt, generating tax-deductible interest payments.
Australian bank Macquarie bought Thames in 2006, the last year in which it paid any corporation tax in the UK.
It is allowed to defer taxes due to investment.
The bank and fellow shareholders took out £1.2bn in dividends, while this year the firm was fined a record £20.3m for polluting the River Thames.
Thames is now owned by several, mostly foreign, investment funds. One of the UK’s largest pension funds, USS, bought an 11pc stake in July.
Thames yesterday said it would also try to enhance its independence from its owners.
Its new chairman will not sit on the board of parent company Kemble Water Holdings. Thames has shared a chairman with its parent since 2006.
Bosses will also review the relationship between the firms and look at how decisions can be made more transparent.
Marchant also chairs engineering company Wood Group and takes over from Sir Peter Mason.
He said: ‘We will conduct a thorough review and implement any changes needed to ensure that we have the right mix of skills and experience needed in this rapidly changing world, have simple and transparent structures and, importantly, that we put customers at the heart of everything we do.’