Wa­ter chief hits back over ‘dis­turb­ing’ Cor­byn plans

The bur­den on Steve Robert­son, the boss of Thames Wa­ter, is a heavy one. He tells Jil­lian Am­brose how he is plug­ging the leaks – in fi­nances and the pipe net­work

The Sunday Telegraph - Money & Business - - Front page - By Jil­lian Am­brose and Christo­pher Williams

THE boss of Bri­tain’s big­gest wa­ter com­pany has is­sued a firm re­buke to Jeremy Cor­byn over his “be­hind the times” and “dis­turb­ing” plans to re­na­tion­alise util­i­ties.

Steve Robert­son, chief ex­ec­u­tive of Thames Wa­ter, told The Sun­day Tele­graph that Labour’s poli­cies threaten in­vest­ment in in­fra­struc­ture up­grades and cus­tomer in­ter­ests. Mean­while the chair­man of BT’S net­work sub­sidiary Open­reach branded Mr Cor­byn’s plans for com­pany div­i­dends “drivel”.

Mr Robert­son de­fended Thames Wa­ter against crit­i­cism of its record on leaks and pay­outs to in­vestors, and said: “I have no in­ter­est in ap­peas­ing any po­lit­i­cal upris­ing. My fo­cus is en­tirely on de­liv­er­ing bil­lions in in­vest­ment and good ser­vice for cus­tomers.”

Wa­ter com­pa­nies would be the first to be na­tion­alised un­der Labour’s wide-reach­ing plans to take con­trol of util­i­ties, rail and postal ser­vices. John Mcdon­nell, the shadow chan­cel­lor, said at the party con­fer­ence that own­er­ship of wa­ter com­pa­nies would be trans­ferred to self-fi­nanc­ing re­gional wa­ter au­thor­i­ties. Daily op­er­a­tions would re­main in the hands of pro­fes­sional man­age­ment and wider work­force, but se­nior ex­ec­u­tives would be ousted. Mr Robert­son said: “It’s dis­turb­ing. I am a strong be­liever in ro­bust, in­de­pen­dent reg­u­la­tion. But what they are propos­ing es­sen­tially cen­tralises reg­u­la­tion to cre­ate an­other gov­ern­ment depart­ment.”

Labour’s plans would un­der­mine the “sta­ble, long-term frame­work”, which has al­lowed wa­ter com­pa­nies to in­vest £150bn since pri­vati­sa­tion, by rais­ing the risk of “tin­ker­ing from each new gov­ern­ment of the day”, he added.

City an­a­lysts at AB Bern­stein warned Labour’s plans could wipe about £15bn off the value of the largest util­i­ties.

Labour’s plans also faced crit­i­cism from Mike Mctighe, chair­man of BT’S in­fra­struc­ture arm Open­reach, which em­ploys tens of thou­sands of mem­bers of the Com­mu­ni­ca­tion Work­ers Union. BT is not threat­ened by re­na­tion­al­i­sa­tion but would face a heavy bur­den from em­ployee-own­er­ship plans. Labour aims to grant work­ers a 10pc stake but to seize their share of div­i­dends above a £500 an­nual thresh­old.

Mr Mctighe told The Tele­graph: “I am a great be­liever in em­ploy­ees hav­ing a share of own­er­ship. What I hate about what they’re say­ing is this drivel around div­i­dends. It’s ef­fec­tively a tax on div­i­dends. If we’re go­ing to in­cen­tivise em­ploy­ees, let’s make sure they keep the full value of their ef­forts.”

The threat of re­na­tion­al­i­sa­tion has al­ready erased bil­lions from the value of com­pa­nies in­clud­ing Bri­tish Gas owner Cen­trica and en­ergy gi­ant Na­tional Grid. Na­tional Grid warned against na­tion­al­is­ing re­gional gas and power op­er­a­tors, say­ing it would not be in the in­ter­ests of cus­tomers, share­hold­ers or pen­sion funds “through which many thou­sands of UK pen­sion­ers have a stake in Na­tional Grid”.

‘Well, this is apt,” chuck­les Steve Robert­son, his ac­cent re­veal­ing a hint of Ed­in­burgh grit. The boss of Bri­tain’s largest wa­ter com­pany is stand­ing by a Thames Wa­ter reser­voir in Walthamstow as the skies give way to a down­pour. He hur­ries off the dirt path through wild grasses and to­wards the gen­tly leak­ing canopy of a nearby oak tree.

Only 15 min­utes from cen­tral Lon­don, Europe’s largest ur­ban wet­land sprawls for miles in each di­rec­tion. Nes­tled within the na­ture re­serve, be­tween meadow plants and hazel trees, are 10 reser­voirs that pro­vide run­ning wa­ter to 3.5 mil­lion North Lon­don homes.

A lit­tle rain is no bad thing for the boss of a com­pany tasked with sup­ply­ing wa­ter to 15 mil­lion homes across Lon­don and the Thames Val­ley. Af­ter the dri­est Bri­tish sum­mer on record, it is some­thing of a bless­ing.

“It wasn’t as though we were go­ing to run out of wa­ter,” says Robert­son. “But we did face a mas­sive spike in de­mand. Peo­ple used shed­loads more wa­ter. We needed to in­crease pro­duc­tion at our treat­ment works, and ask cus­tomers to try to use less – which they did.

“Now we need a rainy pe­riod for the reser­voirs to re­cover. A dry win­ter, fol­lowed by an­other dry sum­mer, would be a dif­fer­ent story,” he says, brac­ing him­self against an­other wet gust.

So far, so good then. But Robert­son is un­likely to find any fur­ther so­lu­tions to Thames Wa­ter’s woes fall­ing from the sky. Af­ter decades in which wa­ter com­pa­nies have been left to qui­etly fo­cus on pumps and pipelines, the in­dus­try has found it­self thrust into the cen­tre of the po­lit­i­cal glare shin­ing a light on its prof­its and pay­outs.

Thames emerged as an ex­em­plar of ev­ery­thing wrong in the sec­tor, and a light­ning rod for po­lit­i­cal ire. Robert­son is ea­ger to prove that changes have been made, but – to his frus­tra­tion – he is still a man on the de­fen­sive.

“Oh, I’m ut­terly bor­ing about it; I like to think of my­self as a sparkling wit and racon­teur,” he says, tongue firmly in cheek. “But ac­tu­ally I’ve turned into a com­pletely bor­ing b------ since I took this job: ‘Let me just ex­plain about this, I need to tell you about that.’ I’ve turned into a tax, div­i­dend and wa­ter bore,” he laughs.

Robert­son has been at the helm of Thames Wa­ter for two years; an ex­ile from the tele­coms in­dus­try, he knew lit­tle of pipes and sew­ers be­fore join­ing.

“When cus­tomers would lose broad­band it was re­ally bad news for them,” he says. “It could have a ter­ri­ble ef­fect, and peo­ple would be re­ally up­set. That is noth­ing com­pared to wa­ter. If you lose wa­ter, your life comes to a halt. All hell breaks loose.”

What was al­ready clear when he took the job was the ris­ing ou­trage at Thames Wa­ter’s fi­nan­cial record. Un­der the own­er­ship of Aus­tralian in­vest­ment bank Mac­quarie the crit­i­cism has been re­lent­less and well re­hearsed by po­lit­i­cal crit­ics: dish­ing out div­i­dends de­spite ris­ing debt, creak­ing in­fra­struc­ture and pay­ing lit­tle to no cor­po­ra­tion tax. Robert­son de­scribes the com­pany’s £20m fine for spew­ing 1.9 bil­lion litres of un­treated sewage into the River Thames as one of his bleak­est mo­ments in the job.

Now, the coun­try’s most ma­ligned wa­ter com­pany is hop­ing to turn the tide of pub­lic crit­i­cism. The task is made all the more ur­gent by the loom­ing threat of re­na­tion­al­i­sa­tion, which has steadily seeped into po­lit­i­cal rhetoric. It re-emerged last week at the Labour Party con­fer­ence in Liver­pool in a raft of pro­pos­als, which Robert­son says “flies in the face of good reg­u­la­tion” and that he de­scribes as “dis­turb­ing”.

“I have no axe to grind in terms of own­er­ship,” he says. “I think many dif­fer­ent own­er­ship models can work. But what has been put for­ward is wor­ry­ing for two main rea­sons. Firstly, the frame of the de­bate is base­less. They claim that wa­ter com­pa­nies are charg­ing rip-off prices for ser­vices, but in re­al­ity bills have not moved higher in real terms for more than a decade, and ser­vice across ev­ery pa­ram­e­ter has im­proved. So from the out­set this de­bate is a false one.

“I am a strong be­liever in ro­bust, in­de­pen­dent reg­u­la­tion. But what they are propos­ing es­sen­tially cen­tralises reg­u­la­tion to cre­ate an­other gov­ern­ment depart­ment.

“What is im­por­tant for the wa­ter sec­tor is a sta­ble, long-term frame­work that is free from tin­ker­ing by each new gov­ern­ment of the day. The frame­work they are propos­ing flies in the face of good reg­u­la­tion.

“In many ways their pro­pos­als are be­hind the times.”

Robert­son has made a num­ber of changes to Thames since tak­ing the helm. The sin­gle great­est step has been se­cur­ing a new own­er­ship base. Mac­quarie’s leg­endary ap­petite for a profit has been re­placed with the long-term sen­si­bil­i­ties of pen­sion-fund in­vestors. This, Robert­son be­lieves, will help to set a new tone for the com­pany in the years ahead.

So far, the new in­vestor base has been sup­port­ive of the changes he is mak­ing. Robert­son has started by stem­ming the flow of share­holder pay­outs by the util­ity af­ter a del­uge of crit­i­cism over its bumper div­i­dends of the past.

He has also pledged to dis­man­tle the com­plex cor­po­rate ar­range­ments through which it pays very lit­tle UK tax, un­der the lead­er­ship of its new in­de­pen­dent chair­man Ian Marchant.

“Our in­vestors didn’t take a div­i­dend last year and will not for the next two years ei­ther,” he says.

The road to re­demp­tion is up­hill, but it’s a path that must be quickly as­cended if the wa­ter in­dus­try is to tackle a loom­ing en­vi­ron­men­tal cri­sis. In 2018 alone the risk of a ris­ing num­ber of floods, droughts and a strain on re­sources has made it­self ap­par­ent.

These prob­lems are keenly felt by Thames Wa­ter, which serves the densely in­hab­ited ar­eas of Lon­don and the South East, where num­bers are ris­ing.

The so­lu­tion put for­ward by the com­pany is to build a new reser­voir near Abing­don in Oxfordshire as part of the £11.7bn it is spend­ing to im­prove in­fra­struc­ture, re­duce leak­ages and cut pol­lu­tion in­ci­dents.

The plan at­tracted heavy crit­i­cism from lo­cal stake­hold­ers when first pro­posed. How can a new in­fra­struc­ture project paid for by wa­ter cus­tomers be jus­ti­fied when leaky pipes lose enough wa­ter to sup­ply 20 mil­lion peo­ple across the coun­try ev­ery day?

It is an im­por­tant ques­tion, and a key part of Robert­son’s self-con­fessed “wa­ter-bore” reper­toire. The an­swer,

‘The idea that we’re sit­ting back is ab­so­lutely wrong. We’re do­ing a mas­sive amount to ad­dress wa­ter leak­age’

he says, is that both new in­fra­struc­ture and a rad­i­cal ap­proach to re­duc­ing leak­age is needed to meet the scale of the loom­ing chal­lenge.

“The idea that we’re sit­ting back is ab­so­lutely wrong,” he claims. “We’re do­ing a mas­sive amount to ad­dress wa­ter leak­age.”

The Sisyphean task of fix­ing leaky wa­ter pipes in the na­tion’s most densely pop­u­lated re­gion is, frankly, un­eco­nomic and thank­less. It costs far more to fix a leak than to pro­duce the same amount of wa­ter that the fix would save. Mean­while, the swell and shrink of the earth’s shift­ing clay lay­ers means new leaks spring up at al­most the same pace at which they can be stemmed.

“Our net­work is leak­ing 480 mil­lion litres a day, and we will fix leaks to­talling 420 mil­lion litres a day. This should mean that we’d al­most re­move all leak­age, but by the end of the year we will prob­a­bly be in a worse po­si­tion than at the start of the year,” Robert­son says.

The grow­ing calls from cus­tomers and the reg­u­la­tor to clamp down on wa­ter waste mean it is still a strug­gle wa­ter com­pa­nies must steel them­selves for. Thames Wa­ter be­lieves that by 2050 it can tighten leak­age to half what it is to­day.

“[The pledge] is a way of show­ing that we recog­nise that wa­ter is not just an eco­nomic as­set but has value in its own right,” says Robert­son. “If we’re go­ing to trans­form the broader agenda over the value of wa­ter we have to be seen to be do­ing ev­ery­thing we can.

“I’m not pick­ing a fight over meet­ing leak­age tar­gets. What I’m pick­ing a fight about, if I am pick­ing a fight, is about mak­ing sure we’re hav­ing a well-in­formed and bal­anced dis­cus­sion about it.

“At the end of the day the num­berone pri­or­ity is a re­silient and se­cure sup­ply of wa­ter long into the fu­ture,” he adds.

“Any­one who thinks that cli­mate change isn’t hav­ing a real im­pact is liv­ing in cloud cuckoo land. Cli­mate change is hav­ing a real im­pact on our re­gion and on our busi­ness and on our cus­tomers.”

For wa­ter com­pany bosses it is not the most im­me­di­ate chal­lenge. But if they can sur­vive the Labour Party then cli­mate change will be the next item on the agenda.

“Come on, then,” says Robert­son, step­ping back on to the damp dirt path ahead. “I think the rain’s clear­ing.”

Steve Robert­son says Labour’s plans would un­der­mine the ‘sta­ble, long-term frame­work’ of Thames Wa­ter

Steve Robert­son, of Thames Wa­ter, at one of its reser­voirs in Walthamstow; below, the £4.2bn Thames Tide­way Tun­nel is needed to cope with an in­crease in Lon­don’s pop­u­la­tion and re­duce un­treated sewage dis­charges into the Thames

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