Hong Kong billionaire’s £130m water bonanza

He siphons dividends from UK giant – despite curbs on payouts that play into Corbyn’s hands

HONG KONG’S richest family extracted £130 million in dividends last year from one of Britain’s biggest water companies.

Details of the payments at Northumbrian Water Limited can be revealed just days before regulator Ofwat announces a crucial decision on the company’s strategic plans, including dividends.

Northumbrian Water Limited has now paid out a total of £1.7 billion in dividends to its owners, the Hong Kong billionaire Sir Li Ka-shing and his family, since they bought the business for £2.4billion in 2011.

Li controls Northumbrian through his CK Hutchison empire, which also owns mobile operator Three and key British infrastructure companies such as Anglian Water and UK Power Networks.

Ofwat last week moved to crack down on big payouts to water company owners and the latest bumper dividend for Li is likely to be seized on by critics and campaigners including Jeremy Corbyn.

Last night, Shadow Chancellor John McDonnell repeated his plan to nationalise Royal Mail, power networks and water companies, which are also under pressure to cut bills and reduce leaks.

The latest dividend payout also comes weeks after Northumbrian agreed to pay nearly £1.2million to environmental groups and wildlife trusts for pollution offences in the North East in 2015 and 2016.

Ofwat, which is putting pressure on water firms to prioritise customers, rejected Northumbrian’s 2020-25 business plan in January when it criticised the firm’s executive pay and dividend policies. The regulator forced Northumbrian to submit a revised version by April and is due to publish its draft response on Thursday.

Northumbrian Water Limited, which has more than 3,000 staff, provides water and wastewater services to 2.7 million people in the North East. It also owns Essex & Suffolk Water, supplying water there to another 1.9million people.

The company’s annual report published on Friday also reveals another big payday for chief executive Heidi Mottram, who pocketed close to £1million.

Northumbrian Water Limited (NWL) paid Mottram £651,000 in the year ended March 2019. But the report discloses that this is only 70 per cent of her total remuneration – the remaining 30 per cent is paid by NWL’s parent company Northumbrian Water Group Limited (NWGL). Her total pay is therefore believed to be £930,000.

Water companies submitted their 2020-2025 business plans to Ofwat amid increasing scrutiny of high payouts to shareholders, who are often large, foreign owners.

Ofwat warned companies about excessive dividend payments last year ahead of the five-year review, telling them they undermined public trust. Companies paying out large dividends have to explain how that benefits customers. The business plans also include proposals for charging customers and tackling leaks and pollution.

However, in its assessment of Northumbrian’s dividend policy, Ofwat said in January it saw ‘insufficient evidence that there is a strong enough link to delivery of obligations to customers and other stakeholders’.

In Northumbrian’s annual report, Mottram said: ‘We were delighted that 91 per cent of our customers accepted our business plan and, while we were surprised Ofwat did not accept our original plan and requested we resubmit it, based on detailed evidence we still believe our business plan will deliver unrivalled service at an affordable cost.’

In its previous annual report for 2017-18, Northumbrian’s chairman Andrew Hunter, who works for Hutchison, claimed to have responded to Ofwat’s criticisms of excessive dividends.

He said: ‘The board has listened carefully to Ofwat’s comments on dividends and financial resilience and is determined to maintain a fair balance between customers, investors and other stakeholders.’

The company cut its dividend from £212.5million in 2017, but still paid out £125.4 million in 2018. It means the £130million payout for 2019 is an increase. Pre-tax profits for 2019 were £207.9million on revenues of £869.1 million.

Northumbrian’s dividend bonanza started in 2011 when Hutchison took it over, paying out a staggering £368.8million in the year ended March 2012. The year before it paid out £93million.

Last week, Ofwat unveiled plans to prevent water firms paying dividends to shareholders if they were not financially strong enough.

Northumbrian’s ownership structure is complex, but the company is ultimately controlled by CK Hutchison, which is listed on the Hong Kong Stock Exchange but controlled by Li’s family.

Li’s other companies have also handed out huge sums via dividends to companies ultimately controlled by the Hong Kong tycoon, who was knighted by the Queen in 2000, and his family.

A Mail on Sunday investigation in May revealed five infrastructure companies controlled by Hutchison paid out more than £1 billion to its parent company in the last two years alone.

Hutchison declined to comment.