Thames Water powers ahead in search for new chief

Sky News has learnt that Thames Water Utilities has identified Basil Scarsella, the chief executive of electricity distributor UK Power Networks (UKPN), as the leading candidate to be its next CEO.

Mr Scarsella, an Australian whose previous roles include serving on the executive committee of FIFA, football’s world governing body, is said to be among a small number of people still in contention to run Thames Water.

The water and waste group, which has a total of 15m customers, has been searching for a new chief since May, when it ousted Steve Robertson after less than three years in the job.

Thames Water, which is owned by a consortium of powerful pension funds and state-backed investors, may decide to delay the appointment of Mr Robertson’s successor until after the election.

An announcement is almost certain to take place by the end of the year.

The nationalisation of Britain’s water companies has been a long-standing pledge from the current Labour leadership team spearheaded by Jeremy Corbyn and John McDonnell.

It is expected to feature in the party’s election manifesto when it is published next week.

Estimates vary about the likely cost of carrying out that threat against an industry which has been beset by a poor record on water leakage and repeated scandals relating to the treatment of sewage.

In June, Southern Water was handed a record £126m penalty by the regulator, Ofwat, over its handling of wastewater, intensifying pressure on the industry to clean up its act.

Labour has signalled that the water sector would be the top priority on its nationalisation agenda, which would also feature Royal Mail, energy network operators and potentially Royal Bank of Scotland – the majority of which is already owned by taxpayers.

On Thursday, Mr McDonnell added BT Group’s broadband infrastructure division, Openreach, to the list of assets which it would take into public ownership.

Its pledge to deliver free full-fibre broadband by 2030 was immediately ridiculed by Boris Johnson, the prime minister, while the telecoms giant argued that it would cost several times Labour’s £20bn estimate.

There is little doubt, however, that the party’s pledge to nationalise industries widely perceived to be delivering poor customer service has struck a chord with some voters.

Moody’s, the credit ratings agency, has suggested that seizing control of the UK’s water companies could cost as little as £14.5bn, well below the market value of the businesses.

Thames Water was taken over by Macquarie, the Australian infrastructure investor, in 2006, in an £8bn deal.

Macquarie sold a number of stakes to third-party funds before offloading its remaining shareholding in 2017.

The company’s current investor base is led by Omers, the Canadian pension fund, which owns just under a third of the shares.

The Universities Superannuation Scheme (USS), which manages the retirement savings of British academics, is the second-biggest shareholder, with funds from Abu Dhabi, Australia, Canada, China and the Netherlands among Thames Water’s other investors.

Mr Robertson’s departure in May came after a period of poor operating performance, with Thames Water under growing pressure to curb the vast amounts of water leaking from its network.

Ian Marchant, the company’s interim executive chairman and a former boss of SSE, the power supplier, has been leading the search for Mr Robertson’s successor.

Mr Scarsella has run UKPN since 2011, having joined from Northern Gas Networks, where he had been chief executive since 2005.

Both companies are ultimately controlled by Li Ka-shing, the Hong Kong billionaire who is among Asia’s richest people.

Thames is easily the UK’s largest water and wastewater services company with an annual turnover of £2bn.

It has 3m residential customers, 15m customers in total when accounting for its waste services, and more than 6000 employees.

The company’s service area stretches from Gloucestershire and Wiltshire in the west, through London and the Thames Valley, to the western edges of Essex and Kent in the east.

Sources close to Thames Water said the choice of its next chief executive was a “critical” one for the business, and that the new boss’s priority would be to improve its reputation while strengthening financial performance.

The company had invested, on average, about £1bn a year for the last 15 years in strengthening its infrastructure and customer service, one source said.

In 2017, Thames Water was fined more than £20m for dumping raw sewage into the River Thames and its tributaries, with a second, smaller, penalty imposed the following year.

Both related to incidents pre-dating Mr Robertson’s time as chief executive.

The water industry is also facing huge pressure from the price controls to be imposed by Ofwat soon after next month’s election.

A number of the major operators are preparing to take the regulator to the Competition and Markets Authority if they are hit by what they perceive to be unfair rulings.

In a further sign of the renewed scrutiny that the industry is facing, its main lobbying group, WaterUK, this week announced that it was replacing its own boss.

Christine McGourty, a former BBC journalist and energy lobbyist, will take up the role in the coming weeks.

Thames Water declined to comment specifically on its talks with Mr Scarsella this weekend but said: “The board of Thames Water, led by Ian Marchant, has been conducting a thorough search for a CEO and has shortlisted a number of high-quality individuals.

“It would be inappropriate to comment on an ongoing process and we will make an announcement when a decision has been made.”