Speaker 1This BBC Podcast is supported by ads outside the UK.
Speaker 2September's always busy. Whole Foods Market can help. Their September stock-up event makes it easy to load your pantry and freezer with flavorful, nourishing food. Even better, there are hundreds of sales. Get dinner going with canned soups and veggies. Lean on frozen pizzas, pastas, and seafood everyone loves. Their build your own family meals feeds for for just $35. Stock up at Whole Foods Market.
Speaker 3Balance your trading strategy by adding futures. CME Group helps you manage risk and capture opportunities in all market environments. Capitalize on around the clock access to highly liquid global futures and options markets across all major asset classes. Visit your online broker and get started. See what adding futures can do for you at CME Group.com/podcast. Derivatives are not suitable for all investors and involve the risk of losing more than the amount originally deposited and any profit you might have made. This is not a recommendation or offer to buy, sell, or retain any specific investment or service.
Speaker 1Hello and welcome back to the Big Boss interview podcast where we chat to some of the biggest names in global business shaping the ways we live and work. And our business editor Simon Jack has been chatting to our latest guests and Simon. In a couple of weeks where the Odyssey has been bigger than the box office. This story is a saga not unlike that is it. And probably gone on for as long. Yeah. Thames water, the biggest water company in the country. You've been following this story throughout.
Speaker 4Well it does feel like I've been on this Odyssey for years definitely. And listen, there's plenty of hazards along the way. In fact, I would say that Thames water has got some claim to be the most beleaguered company in the United Kingdom. It is up to its neck in debt, 20 billion pounds. It is running out of cash. It will run out of cash by the end of the year. The public or furious MPs want something done. Andy Burnham's been waiting in and what should happen to key utilities. There is a very wide palette of things to talk about on this one. So I sat down with Chris Weston and started by asking him in a way, sort of how do we get to this point when the companies in so much trouble? How does he see we should get out of it? It was privatization, a big disaster in the first place. Spoiler alert, he doesn't agree about that. And how we can get out of it. There's a deal on the table. It's already been rejected by the government. Talks are ongoing, but there's a chorus of MPs and others and action groups
Speaker 1who wanted to be put into special administration. And is it that chorus for why they've spoken now? Because I know you have tried endlessly to speak to them on the record. Not always been, perhaps understandably, given the pressure you've talked about. Been that keen to do a lot of interview. So is that the sort of why now? I think they feel that there's a moment for them to speak up.
Speaker 4That they basically are kind of saying, look, they're going to take 10 years to fix this company. Bear with us. We know you're angry. There's a deal on the table. And really, in a way, it's their pitching in, because in a way, they're not in control of the future of their own company at the moment. So they've got to say something, which is that we're trying very hard. We know you're angry. Bear with us. But how do some interesting warnings as well about things like, you know, obviously, we're talking when there's a drought in half the country. And a host pipe ban. I was going to joke there's lots of angry gardeners out there. Well, exactly. To cap it all, Thames is one of the countries of the regions of the country, where there is a host pipe ban. There's about half a country officially in drought. And he talks, you know, interestingly and alarmingly in a way, about this being the new normal. We need new reservoirs, we need a new Nick technology. We as consumers need to be more mindful about how we're doing, particularly if we're going to need things like more houses, data centers, increasing population, climate change, all that kind of stuff puts amazing stress on the company, which is not in the best of health.
Speaker 1Yeah. And all costs is money. So a fascinating chat. This is Simon. Then with Chris Weston, the boss of Thameswater.
Speaker 4Chris Weston, thank you for joining us on Big Boss interview. I would say that you were the boss of one of the most challenged companies in Britain. 20 billion pounds in debt, running out of cash. More cash going out of the business than coming into it. And a lot of question marks about what the future looks like, whether it can survive. Even your own directors said there are material risks to the company as a going concern, which has a pretty big red flag in corporate terms. Can you start by laying out how did we get to where we are today? Was it in competent management, really shareholders, poor regulation, climate change,
Speaker 5layout, how we got to where we are? Certainly. Well, good morning, Simon. Good morning. Thank you very much for inviting me along. I'm very excited about being able to give my perspective on all of this. And it certainly is a challenging situation. That's challenging and extremely complex. So there's no straightforward answer to that. You can't point out one individual or one entity. And I think, I mean, I've been there two and a half years. So I have a pretty good appreciation of how we got to where we are now. And I think in reality, the best place to start is to look at what Sir John Cunliffe found in his report in the Independent Water Commission. And he pointed to a number of factors that I agree with. First of all, first off, there was a point that he made about the lack of long term strategic direction from the government and prioritisation. Is it lower bills or do we invest in our infrastructure? And it's difficult to do both of those things. The second is around the regulator and the increasing fragmentation of regulation where you've got a number of different regulatory organisations. And they all have their own responsibilities, which is quite understandable. But there's no overarching entity who is accountable for the whole sector. And that creates all sorts of problems. You have an aged infrastructure. Our infrastructure started to be built over 150 years ago. And so the health of it, the resilience of it, particularly when you are facing the situation with climate change. I mean, you can see that outside today. And also the demands from population growth and economic growth. All of that creates stress on that infrastructure and incidents and a requirement for more investment. And we have to respond to that. And then I think you do have to look at the companies themselves, their financial resilience and the governance within those companies. All of those things he pointed to in his report. And I would subscribe to them. There's not an individual thing. It's a systemic failure of the whole regulatory sector and the way it's been set up. And I mean, for me, I mean, the government has accepted that. And I would love to see what he recommended implemented. I think that is absolutely fundamental. And that, that, I mean, part of that would support the turnaround that I am focused on. And that is both the recapitalisation of the balance sheet, which I'm sure we'll get to. But also the operational turnaround and the amount that we are having to invest in our infrastructure to make it more resilient for the future for our customers and the environment. Okay.
Speaker 4Let's unpack a few of those. You say tension between regulators. And you said the government couldn't decide whether it wanted more investment or lower bills. So are you saying that bills were too low for too long to fund the investment that we needed? And that was a mistake. And whose mistake was that?
Speaker 5So I think that is absolutely the case. Bills were too long, too low for too long. I mean, I look at our infrastructure. I have 440 treatment works of various kinds. And I have network that goes about four times around the circumference of the earth. It is massive. And keeping bills low mean that we can't invest enough in that infrastructure. And I don't, I'm not sure that anyone particularly is to blame. I think that no one appreciated the extent of that network and the amount of investment it required. And that investment had to come from the capital markets to enable it. And that means borrowed money debt. Yeah, but that is a, that is how the water sector, the water industry, works. It was set up to do that because we spend a lot of money every year investing in our infrastructure. And the money we get from our customers does not cover that cost. And we recover the cost of it over decades. It is the best way to keep bills low. So you borrow the money up front, spend it, and recoup it many years down the line from bills. Yeah, and the cheapest way to do that is to have appropriate gearing, appropriate levels of debt, appropriate levels of debt. I agree. And that and your investment grade so you can borrow that debt as cheap as you possibly can. Okay. And that is how the water industry was set up to work. But you have inappropriate levels of debt at the moment, do you not?
Speaker 4We do. Yes, we do. Okay. And how did that, I mean, one thing you haven't mentioned is what some people would say greedy shareholders in the past. We don't have any shareholders. The moment really, they've walked away. But for the, in the 10 years that the investment bank Macquarie was the controlling shareholder, five of those 10 years, they took out more money and dividends than the company actually made. And at the same time, put in no money of their own. and debt went from around £2.5 billion to around £12 billion during that period. that seems to be extraction on a massive scale.
Speaker 5- So, I mean, you point to a very valid issue. And I think the whole issue around governance is incredibly important. I'm not going to express an opinion on what Macquarie did. It was way before my time. I mean, when I look at tens in particular and why we have so much debt, I would say that at the end of the day, the targets that the company is expected to make are not realistic. And if we don't hit those targets, we get penalized for it. And an example would be something like leakage. We have to hit a certain level of leakage, but it is so far an excess of what we are capable of doing. I think anyone would be capable of doing, however much money you invested, that it is not going to be achievable. It's just not realistic. And I think we have to recognize that as we think about how we turn around the company. And if you don't do that, you don't address a fundamental flaw in the way that regulation works. And so John Cunliffe recognized that. And he said that the regulation needs to be more company and specific. And he said that regulation needs to have a turnaround regime in it. So we can break this so-called cycle of doom.
Speaker 4- So you could just break the cycle of where you're getting fined, which is taking money away from you to be able to fix the things you got fined for in the first place. - Yes, quite. - Okay. - But you say that unrealistic target is keeping human excrement out of our waterways a target that you're not realistically hit. Is that surely an unrealistic requirement, isn't it?
Speaker 5- I mean, you know, we want to do better when it comes to pollutions. We accept we're not doing well enough. We treat a quite incredible 4.3 billion liters of waste every single day. And the vast majority of the time, 99.5% of the time, on average, that gets treated through our sewage treatment works. Sometimes something goes wrong. Sometimes you get a weather event that makes it very difficult to treat it as well as we normally would. And it goes into a river. We do not want that. And we're investing a huge amount to try and ensure that we eliminate that. I do think we have to be a little bit realistic about it. The chance of getting to zero pollutions, I think is very, very slim. We can invest a lot. We work very hard to try and stop pollutions happening. But people do abuse our network. There are people that misconnect into our network. Some deliberate, some not deliberate. And those kind of factors are outside of our control. The weather is outside of our control. It's not an excuse. It is a reason. And we are working very hard to try and combat that. But I do think there needs to be a degree of realism brought to the argument. And I mean, I look at something like the River Tens, that is cleaner than it has been for 100 years now. That's not me saying that. That has come from ZSL, London Zoo. They recognize the improvement in the quality of the water in the River Tens. And there are many other factors that go into the river that make it less clean as well. Do you ever swim in the River Tens?
Speaker 4- I haven't for a while. - Okay. Count Ben Fates, that's a well-known politician. As he says, he wants to get water bosses to go and have a dip in their local rivers. Will you take up that challenge? - I am sure at some point I will be in the Tens. - Okay, fine. Let's me go. The thing that people think is that water, it's one of life's essentials. The risk, the risks should be low in this business. And their award should be low. And that every drop of money should go back into sustaining the provision of that life essential. And therefore, things like dividends to shareholders, which we saw in the past in this company, high pay, you're paid over a million pounds a year. All of that extracts money from that endeavor. And that privatization, a privatization where there's no competition, usually CEOs are paid a lot to outsmart the competition. You haven't got any. And that's why people think that this is an industry that doesn't suit private capital and privatization. Do you see why people say that?
Speaker 5- I completely see why people say that. I mean, as you say, life's essential service. I understand why people have that view. It's not a view that I share. The industry was privatized in 1989. Prior to that point, water companies were owned by municipalities. And it was chronically underinvested in. Since privatization, as best I can calculate, there's been an investment of about 240 billion pounds into our water infrastructure. And I would argue our infrastructure is in better state than it would have been if it had been owned by the government where you would be competing with quite understandably defense, the health service, education, social security, all of those types of things. And I do question whether we would have attracted the same investment. And if you accept, and I know people have a different view, but if you accept that you are going to privatize and operate within the capital markets, then things like interest on borrowings and equity, you have to feature as part of that model. And you have to think about how you make that model as efficient as possible. And ultimately, it should be low risk and low reward. I agree with you. But unfortunately, because of the circumstances that we talked about at the beginning of this discussion, it has meant we have got into a much more risky situation with regard to tens, and I'm sure other companies as well.
Speaker 4- Okay, so what is the best way forward? There's a proposal on the table by consulting with the lenders who lent you all this money, or most of the money that they've, has been lent. And they want to basically write off a bit of that debt, put some new debt in, put some new equity in, and go forward with a new plan. Do you think that a bunch of, so let's get a hedge funds, Vulture funds, some people call them, who snapped up debt on the cheap. There's quite a lot of new debt holders who bought it when it was distressed. Do you think they're of the suitable owner for something as pivotal as this?
Speaker 5- I mean, I think there is a misunderstanding in that. We have over a hundred different creditors. They are all sorts of different institutions. Yes, there are hedge funds in there, but there are banks, there are pension funds, there are infrastructure funds, there are whole suite of different providers of that debt. And they are proposing a market-led solution. And they're not trivial sums that are being involved in this. I mean, first of all, the current shareholders, who no longer exist, have had their equity wiped out, roughly four or five billion pounds. The providers of our debt at the moment, who are proposing a debt for equity swap, will write off around nine billion pounds of the debt that they lent to tens. They will inject further equity. I mean, these are not small numbers, and it would lead to a fundamental restructuring of tens, a strength and balance sheet with some of the lowest gearing in the industry. And most importantly, we mustn't lose sight of what that enables, that then allows us to carry on investing in the way we are, which is so necessary for the resilience of our infrastructure, given some of the demands on it that we're faced. And that is the best thing, I think, for customers and for the environment.
Speaker 4Andy Bell has talked about greater public control. We're not quite sure what that means. Could mean public ownership, it could mean what they did in the buses. There is quite a chorus of MPs and others who think that this company should be put into a special administration. At that, you cut the debt quite significantly. You can stabilize the company, have government appointed administrators go in there, and then you look to stabilize it, and then maybe one day sell it to somebody else who aren't a bunch of distressed debt holders, why not put it in special administration or indeed permanent nationalization? What's the argument against it?
Speaker 5Well, the first thing I'd like to say is that I completely agree with the Prime Minister. I think the only way out of the narrative that surrounds Thames at the moment is if there is greater public control and an ability to hold us to account more than has been the case in the past. So I think that is a very valid idea that we need to explore and work out how best to achieve that. So that's the first point. Second point I'd make is that a special administration, importantly, if Thames goes into special administration, we will carry on providing the service we do today. That's very important. We'll carry on providing water and taking waste away and dealing with it. So that will continue as normal. I don't personally believe that that is the best route forward for Thames. So first of all, we have a proposal on the table from our creditors. And I think it is a pretty robust proposal. They have written recently to the Secretary of State about how they're going to enhance it. And so I am supportive of that direction of travel. If you go into special administration, I think there are a number of issues with that. First of all, you are funded by the government and there is a risk that the taxpayer We'll have to pay that, bear that fund. It's not clear how long you would be in special administration for, and the longer you are, the more the risk is around the cost of financing the company during that special administration. By the taxpayer. By the tax player. And then, I mean, if you don't nationalize it, you've got to get tens out of special administration back into private ownership. And we would have to go through the whole process that we have been through over the last two years, all over again. We would have to discuss an appropriate regulatory package. We would have to find an appropriate buyer who would back our business plan. And all of that would have to happen again. And I think you're doing it while you, although we will focus on continuing to provide service, there is more risk around our ability to do so. And also our ability to continue to invest in the infrastructure, which is, as I've said, a number of times so fundamental to what we need to do over the coming years.
Speaker 4So in a nutshell, the special administration would take your eye off the ball in a way. It would mean you have to start from scratch on a process that is already ongoing. And the stuff that you need to invest in might go into a bit of limbo. Suppliers would walk out.
Speaker 5I mean, what would happen? So I don't think it would take our eye off the ball in providing service day and day out. That would happen. I worry that there would be disruption to our capital investment program that it's going to take 10 years to improve the asset resilience of this company to improve that asset health. And I worry that that would become disruptive. We will have to manage the supplier base who have been very supportive to date. And you're right. We would have to go through the whole corporate process around attracting a new buyer and a regulatory package to be able to get it out of special administration.
Speaker 4Seems to me the lenders have presented a bit of a carrot and a bit of a stick. The carrot is a golden share for government, more involvement of local authorities and regional leaders. And the stick is to try, they're basically saying try and nationalize us. And we will sue to get our debts back in full. And one of the creditors is a company called Elliott Management who pursued the government of Argentina for a decade until they got their money back. Do you recognize there's a carrot and stick approach here? And the creditors are spoiling for a fight if they try, if the government nationalizes
Speaker 5that you... I mean, I don't think they're spoiling for a fight. I think their prime focus is on making this proposal work. And it is an unprecedented proposal that is in front of us at the moment. It leads to a restructuring of the company with a balance sheet that has most likely the lowest gearing in the industry that enables us to carry on investing and investing in the infrastructure that we need to do. They have made a lot of promises around that, which I think are laudable, so they're not going to take... They're going to reinvest all the profit. They're not going to take any dividends for at least 10 years or before there's an IPO. A sale of shares back to the public, yeah. And if there is an IPO, if there is any outperformance in return, they'll share it with customers. They have said they'll stick to the bills that were agreed with off what for the final determination with the slight tweak around the cost of capital. I mean, by and large, it is an unprecedented deal that is good for our customers and it's good for in the environment and it is at no cost to the taxpayer or the government. Okay.
Speaker 4But they are asking for a modicum of leniency against fines into the future. And people are saying, why should we let them off the hook? A private sector buyer says, just give us a little bit of breathing space until we turn the company around and there should be no special pleading for Thames if you're selling back to private sector buyers.
Speaker 5Well, I think there is a misunderstanding in there. So, first of all, I do think the company needs a bit of breathing subspace. We do need to turn it around. I mean, we have been working...
Speaker 4We don't find us, please.
Speaker 5No, no. I didn't say that. Yeah. But we do need to turn around. We've been working very hard on that for the last two years. And we are making progress and I'm very proud of the progress that we're making. But to your point on leniency, the creditors are not asking for leniency. So they accept that the regulators, the EA and off-watt, they're not asking for them to change their enforcement policy or their sanctions policy and they understand that they have to operate within that. There is a penalty regime within the way that the off-watt regulatory model works. They are... It's part of the proposal paying up front those penalties. And both of those two points are important because both of those create certainty. They know what they're investing in and that's important from a credit rating perspective. We have to get back to investment grade so we can invest as cheaply as we can. And understanding the liability associated with regulators and the penalties is an important part of that.
Speaker 4That is a form of leniency. If I said here's 600 quid, don't give me another parking ticket for the rest of the year. I mean, that means I could do whatever I like in the subsequent period. That is a form of leniency.
Speaker 5Well, I disagree because we and the creditors completely understand we're subject to the law. And if we break the law, there will be penalties involved.
Speaker 4Okay. All right, you've talked about the CUNLIF review. What are the key findings here? I mean, he talked about, you can't treat all water companies the same. We are where we are and some will need a turnaround regime. Is that what you took comfort from and that's why you're such an advocate of it?
Speaker 5Well, I think the recommendations he made were very sensible and it goes beyond the specifics of tens. I mean, I would always argue that a regulator in coming to a decision around a price regime should take into account the specifics of a particular water company. I do think that's important. It's not all they will take into account. They will also look at how it's performing relative to its peers. I do think it's good that he suggested there should be a turnaround regime. But I think if you start to take a broader picture, what he said about clear prioritization and direction from government over the longer term is very important. The way that he argues that there should be more regional representation. I think that goes to the Prime Minister's point around greater public control. I think that is an absolutely essential part of how we recover from this. A focus on the understanding of our assets. All of those things, I think, you can't, I don't think, pick and choose. It should be seen as a package, taken as a package. When you look at it in the round, I think it would address all of the systemic failure that we have seen over the last 20 or so years in the sector.
Speaker 4What is your... For those people who are hell-bent, who are very determined that you should go into special administration or, indeed, full nationalization, what is your warning, why is that a bad idea? Are you saying, be careful what you wish for because the tax pill will be on the hook? What is your message to those who would have that?
Speaker 5Well, firstly, this is not something that can happen on a whim. There are very clear criteria as to how you would get a water company into special administration. You have to be insolvent, and then the company, the directors, would ask to be put into special administration. That's clearly not the case in the case of TEMS while we have the support of our creditors. Or the other is that you have failed to deliver against your license. And again, I'm not sure that that is an easy barter. Well, you failed 11 out of 20 performance tests. No, but the performance conditions are different. That is how we are performing year in year out. No one meets every single one. And I think that unpleased with the improvements that we've made over the last two years or so, we are meeting more of those tests. But you have to remember that many of those aren't designed in a way to recognize we are a company in turnaround. And so when I step back from that, I mean, if you'll allow me, the focus on performance that we've had over the last two years and the focus on increasing our investment to the infrastructure, they are laying the foundations for a much more robust TEMS that will deliver what our customers expect over the coming years.
Speaker 4I think a lot of people could argue that you could be put in to saw on the basis of performance. You have, you've got one star out of five in the recent assessment. They've been, you know, multiple pollution events. You were fined 123 million pounds, the largest in off what's history just a year ago. I don't think a determined government have any problem saying that you're in breach of your license.
Speaker 5I'm not going to argue. My most important focus is if we go down, do you admit that you could be, but you could be arguing breach. I'm not sure that that is the case. I think we would have to look at it very carefully and assess it from a legal perspective. The most important thing on all of that is even if that is decided and we do go into SAR, we will continue to provide service. And people often overlook that. And I have my job in leading the company is to reassure customers that that is the case. And also to reassure the 9,000 people that work for me directly, and 10 or 15,000 supply chain who are helping us with the capital investment program. I want to talk about staff in a little while.
Speaker 4I just, just a final point on in your most recent results, your cash outflow was over a billion pounds. Yes. Because the money that's coming in in bills is not sufficient. to pay for the stuff you're investing in, and that's why in the past you've had to borrow so much money. What are you saying about where that money comes from and just asking to spell out if it goes into special administration or nationalization? Where does that money come from?
Speaker 5At the moment, that money comes from our creditors, and we are relying on our creditors to carry on providing that to support the investment program that we're undertaking. If we go into special administration, that money comes from the government. And therefore the taxpayer? Possibly. I mean, they would lend that money to the company. And as we came out of special administration, I mean, there is a chance that that money gets repayed to the government.
Speaker 4Okay. I mean, it's not just a chance. They become the super senior creditors, the first in line to get the money back. So that's the whole point. Special administration needn't cost the tax pay anything once it's sold back to the private sector. I'm not sure that that is the case.
Speaker 5For them to become super senior, I think they do need creditors to cooperate with that. I think there is a root to doing it, but it's not straightforward.
Speaker 4Just something that occurs to me, let's say you do go into special administration. Usually that's a temporary affair until you can find someone else to sell the business to. I'm just wondering whether you find it hard to conjure as I do. A Burnham government saying they're having a beauty parade for another probably foreign bunch of investors. So it's a temporary nationalization quite easily collapses into full nationalization, doesn't it?
Speaker 5I mean, I do think if you are going to put a company like TEMS into special administration, you need to be clear as to how you're going to get it out. I mean, an obvious way is to market it and put it back onto the market, but there is an alternative in nationalization. And then you're bringing TEMS onto the national balance sheet, and you are financing that massive infrastructure investment program that is so necessary amongst all of the other things that the government is trying to do. So up against defense, health, education, etc. And I think the Prime Minister has been, I mean, he is saying he wants greater public control, and I am all up for that and happy to have a discussion about what that looks like and how we make it work. Are you in discussions regularly with the new administration right now?
Speaker 4Not at the moment, no. You haven't met the new environment secretary, Angela Eagle. Have you met the Prime Minister? No. Not yet. Okay. It's going to be an interesting first test for how they deal with things, I think. Let's talk about the customers in the future. We had one of the wettest spring, winter springs on record, and here we are in July with a host pipe ban. I just wonder how severe, half the country is in drought, the moment including the TEMS value. How severe is the environmental challenge if this is the new normal?
Speaker 5I mean, it's very difficult for us at the moment. I am very grateful for the hard work of everyone in TEMS at the moment to make sure that we continue to provide service in the way that we are in these stress conditions. So, I mean, that would be the first thing I would say.
Speaker 4How stressed are we? I mean, you know, in the history of TEMS, you know, how many times have we
Speaker 5seen conditions like this? Well, it was a bit like this last year, and in 2022 was the last drought, so I think we are seeing these more frequently, and I think we need to prepare for that and be ready to deal with this in the future. I mean, is this the new normal is what you're saying? I think this is the new, absolutely, the new normal. It did rain in the winter. January and February were extremely wet, way wetter than you would normally expect them to be, but since then, rainfall has been pitiful in July. We've had no rainfall at all. So, during the winter, we fill up all the reservoirs, the aquifers in the ground all fill up and recharge, but they do rely on nature to replenish them periodically, and we do not have enough storage to get through a summer, and we have to think about next winter as well without restricting people's usage of water. I mean, we have petitioned in the past to build reservoirs. The last one we built was far more B, I think, in 1977. Well, after the the Great Summer of 1976, co-incidentally. Yes, co-incidentally. We did try and get approval to build a new reservoir about 2010, 2011, a long time before I was around. That was turned down. We didn't make the case appropriately well enough, but if we had been successful, I don't think we'd be in a hose pipe ban now. So, we need to think about how we get greater storage of water to get us through these drier months, and that's why something like the Whitehorse Reservoir that we are now going through the approval process. This is in Oxfordshire, and this is near Abingdon. I mean, it'll be 150 million litres of water. It'll be, I mean, the largest in the UK, I think. It will transform the way that we're able to cope with drought conditions. There are other schemes that we are absolutely going to have to implement as well, and we are planning to do those now, but they take a long time to build. How long does it take to build a reservoir? Well, we are, we are starting to fill it up in about 2038. Limey. And it'll take three years to fill. But then if you
Speaker 4look at how there's no cavalry arriving any time soon, I just wonder, you're saying it's very stressed at the moment, and you think that there is a house building target, data centers, population growth. Yeah. You put all these things together. It's quite a grim outlook, isn't it?
Speaker 5I think it is all manageable. I mean, something like growth, data center growth, we've got to be a little bit more innovative about how we think about supplying them. I mean, do we really need to use potable water to do that? Or can you use final effluent from some of our sewage treatment works to be able to do cooling of data centers? So I think innovation can play a very big role in how we can help overcome some of the current issues that we are
Speaker 4faced with. But do your customers, the 16 million people that you, uh, terms has as customers, do they need to start thinking about responsible ways of using water? I mean, do we need, do we need
Speaker 5to start thinking adjusting to the new normal? And in what ways? I think, I think we do. I mean, there are already requirements on housebuilders, they build new houses to think about how they, they heat them and provide utilities like water to them. So I do think we need to be more mindful of how we use water. I think it is. What about for regular consumers? What should they be
Speaker 4thinking about? How should they change their behaviour? Well, I mean, I can't help but turn the
Speaker 5tap off when I'm brushing my teeth. I mean, so do you have to use a hose or can you use a watering can? I mean, I mean, there are all sorts of different ways that you can think about being a little bit more efficient in the usage of water. And reminding people of that, particularly in times of stress, is a role that we can play. And I would say also the government can play.
Speaker 4If this is the new normal and we've got all these additional demands on water, can you guarantee that our water supply is secure into the future? I mean, I think so, yes. The future is a long time.
Speaker 5We'll certainly in tens now. I'm comfortable that we will continue to be able to provide water
Speaker 4to our customers. Yes. Okay. Okay. But do you think we're a bit complacent about stresses on
Speaker 5the system? I do. Yeah. I mean, I came into tens. I was new to the water industry. And I was absolutely blown away about what we do every single day. And it's, I took it for granted when I came in. And so I think we need to tell that story better. We provide 2.6 billion liters of the highest quality drinking water in the world every single day. I mean, it is quite phenomenal. And we deal with 4.3, 4.5 billion liters of waste every single day. You look at sewage treatment work in the east of London, Bechton. That deals with 27,000 liters of waste a second. I mean, it is quite phenomenal what we do. And the people that we have in the business who are committed to carry on providing this service, I feel very lucky that they are part of this team that do this every single day. And I took it for granted because I didn't appreciate the scale of what was done every single day. I think many customers also take it for granted. And we have, I think, the best water and waste services in the world.
Speaker 4I mean, a lot of people would disagree with that. Fertilish Archie says that the privatisation of the greatest column perpetrated on the British public, people are furious that there's waste in there, rivers and waterways, people are getting sick. You must know, and that's one of the interesting things, isn't it? The public anger directed towards this industry is extraordinary. It is intense. Have they got it completely wrong?
Speaker 5It is uncomfortable. And I can understand it. And there is a huge amount more that we can do better. I mean, we are very focused on the turnaround of the company. And that massive infrastructure investment programme that we have underway at the moment, we invested £2.7 billion last year, capital investment in our infrastructure up 20% on the year before. I mean, that is a material step up. It is one of the largest capital programmes in the country. And certainly by the end of the this five year regulatory period, I think it will be the largest. And so there's a lot that we are doing. But it takes time for people to recognise that. And we need to be better at communicating it and particularly communicating it to local stakeholders and customers. Yeah. And just on the customers,
Speaker 4I think what you're saying, we're putting in your own words. We've been a bit complacent about our water provision. We need to be mindful of how we use it. and we've paid too little for too long for water bills. You know, is that correct?
Speaker 5- I think that's a pretty fair summary. Yes, I do.
Speaker 4- Okay. - All right. Just on the personal stuff, what's it like being, we ask our bosses this and tied at time, what's it like? Why did you take the job? So it's like the worst job in Britain, to be honest. I mean, you are paid over a million pounds, I'd grant you that, but that's so rather chief execs. What's it like being the head of a company
Speaker 5which is so reviled by the public? - So why did I take the job? There are a number of factors in that. First of all, I mean, you can't help, but look at Thames and the water industry and how much it matters. It is fundamental to society. So there's a real purpose there and that struck it called with me. I love the complexity and the challenge of something like that. Like that, I found very attractive as well. And I felt that my experience that I'd had working in other companies and improved them. - British gas, British gas, yes. I felt that that would help and my experience could help turn the company around. So I would turn the question round and say why wouldn't anyone want to take this job? It is a phenomenal job and I love it. I enjoy it. Every single day I'm learning something new. I am working with some really good people and I really enjoy it. It's a rewarding job to do.
Speaker 4- What's it like to the total unemployed? You get very well paid for what you do. Some of your employees probably do not. And there've been instances of tens of people being booed in the street. That must be very hard for them.
Speaker 5- Yeah, I am very worried about some of the rhetoric about tens and the implications of that. And we do have physical assaults of our staff, verbal abuse, I get the same. None of that is acceptable or appropriate. I have very hard working people who do a phenomenal job every single day and they should be respected for what they do.
Speaker 4- Of the failings of the company that people get angry about, which is the one that irks you the most? Is it the human waste in the water? Is it the spills? Is it the public image of the company? What's the one that bothers you the most?
Speaker 5- I don't think any of it particularly irks me. I do wish there was greater understanding of the magnitude of what we're dealing with. And this is not something that is going to get fixed overnight. I mean, I've been here two and a half years. I am proud of the improvements in performance that we have seen, but it's going to take 10 years and 10 years of increased investment in our infrastructure to fix a lot of these problems. So I know people are angry and I have every sympathy for that, but I think people also have to be patient and recognize that this is something that is going to take a decade to fix. It's not going to happen overnight. And people's patience has already ran out, hasn't it? - Well, you can see that. You can see that in the anger that people are not patient about it, but I can't do anything about that other than focus on improving the infrastructure and the operation of the company. And that's what I do and the team does day in, day out, even with everything going on around us around the recapitalization. - Okay, and just one of the politics of it,
Speaker 4you may well think that this plan that the creditors have proposed is a good one, but the politics of this is is that this is seen as a failing sector and tems a failing company within a failing sector. And it's time that a government grabbed this by the scruff of the neck and did something, launched the boy, if you like, and put it into special administration or even full nationalization. That's the direction the politics is taking, do you agree?
Speaker 5- So I would say that there is a solution out there right now, and Sir John Cunliff outlined it in all of his recommendations. And that needs to be focused on and enacted, I think, over the next five, six, seven years. However long it takes to do because that, at the end of the day, will fix the systemic failings across the sector. And I think that is the right thing for customers in the environment. On tems, I would say, we have a proposal on the table from our creditors at the moment. It is an unprecedented proposal and it will be at no cost to the taxpayer or the government, but we do have to listen about greater public control and how we bring that about.
Speaker 4- Okay, but there is a proposal, there might be a better proposal. What some of the other people out there think is that the creditors have got a strangle hold on this process and other companies who might have a better bid have been shut out of the process. I think the company from Hong Kong the other day who would love to have presented a different proposal which they think would be a better one. Why is this open to more bidders?
Speaker 5- Well, we went through a quite extensive process. We approached 60 different parties. We got down to a short list of six to seven. People put their proposals forward and we went forward with what we judged to be the best proposals. We've not had anything since then.
Speaker 4- Okay. - And just a final thought, sometimes you don't help yourself as a company. For example, you say that we are going to, the company is running, going to run out of cash by the end of this year. And at the same time, you've got a 14% increase in your basic pay, a 99,000 pound retention fee, which people say is a bonus by any other name and sort of driving a coach and horses through the bonus ban. Why did you need to do that when the company's in such desperate strengths and it looks so bad?
Speaker 5- I know there is anger about pay. My pay is decided by the remuneration committee and the board and they go through a process of benchmarking to set that. The thing I am more concerned about is how I attract people and retain them within terms. We need capable people to help turn this company around. And if we're not prepared to pay market rates, then they won't, they won't come to us and they won't stay with us.
Speaker 4- But this is a sub market company. You know, it's not like you're working for Google or something, you know, having to get... This is a company which is languishing at the bottom of suddenly tables for its performance.
Speaker 5- Yeah, I'm not even beginning to suggest that we would be compared to something like Google. I mean, there's, but this is, I think by many measures would be in the FTSE 50, if it was a listed company, it is the most complex recapitalization that this country has probably ever seen in its corporate history. And it's also an extremely complex turnaround. And I need to attract people to terms and keep them to help me do that. And if we can't do that, it's not gonna work. And that is not ultimately in the best interests of customers or the environment. - If you could leave us with one message for customers out there who are frustrated, what would it be? - Well, first off, we completely understand that frustration. And secondly, we are working very hard to address the root cause of much of that frustration. So we are undertaking the biggest investment program in our history. And as we do that, we are improving the operations of the company. And that, I think, is the most important thing. - There with us is what you're saying. - I'm afraid too. I can't do it overnight. If I could wave a magic wand and make it happen tomorrow, I would. But we do have to be realistic about it.
Speaker 4- And just a final thought on the environment. If people, you know, this will be going out. It's until you'll be going out when people will have had the third or fourth heat wave in a year temperatures well into the thirties. What is the message on responsible usage of water, whether this is a new normal, you know, address the environment. Address the current environment we're in.
Speaker 5- Well, I think the EA, I mean, they have announced environment agency today. The environment agency have announced today that we're in drought. And we have to take that seriously and act responsibly around it. So I would urge people to think about how they conserve water. And at the same time, we are doing all we can to fix leaks to make sure we keep as much water in the network for our customers and keeping everything operational and working as it should during a very difficult time.
Speaker 4- Okay. - Chris Weston, CEO of Tempwater. Thank you very much. I'm talking to Big Boss interview.
Speaker 5- Thank you, Simon. Appreciate that.
Speaker 1- I'm business editor Simon Jack speaking to the boss of Tem's water, Chris Weston. And remember to find literally dozens at this point of conversations just like that. Well, make sure you're subscribed to the Big Boss interview podcast. And while you're there, we're really trying to help other people find the podcast. So if you could give us a five-star review, and if you have time to write something nice, but what you'd like or who'd like to hear from next then we would love that as well. It does help more people find the podcast. Big Boss at bbc.co.duk is the email we'd love to hear from you. Thanks so much for listening.
Speaker 3(upbeat music) - Balance your trading strategy by adding futures. CME Group helps you manage risk and capture opportunities in all market environments. Capitalize on around the clock access to highly liquid global futures and options markets across all major asset classes. Visit your online broker and get started. See what adding futures can do for you at CME Group.com/podcast. - Derivatives are not suitable for all investors and involve the risk of losing more than the amount originally deposited and any profit you might have made. - This is not a recommendation or offer to buy, sell, or retain any specific investment or service.
Speaker 6- Get more with bbc podcasts, wherever you listen. Be the first to listen to your favorite shows, like Evil Genius, Good Bad Billionaire, and You're Dead To Me, with a subscription to bbcpodcasts premium on Apple podcasts. You can also enjoy a range of our podcasts add free with an Amazon Music subscription.
PodcastTranscript AI