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 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