November 27, 2020

Thames Water to shut Cayman Islands subsidiaries under new chairman

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By Julia Kollewe From The Guardian UK

UK’s largest water company, which has not paid corporation tax in the UK for the last 10 years, to review business

Thames Water has appointed the former SSE boss Ian Marchant as chairman to spearhead a review of the business, including closing the company’s controversial Cayman Islands subsidiaries.

Britain’s biggest water and wastewater services company, which has not paid corporation tax in the UK for the past 10 years, said there was no tax advantage from its two Cayman subsidiaries and that they were created for the purpose of raising money through bonds to fund its infrastucture investment programme. But it is understood that management accepts that “it just looks wrong”.

The company said the subsidiaries “have always been fully registered in the UK for tax purposes but no longer serve their original purpose of enabling smoother access to the global bond markets”.

Thames Water has a complicated structure of nine companies and the new chairman has been tasked with simplifying it. Marchant, who ran energy firm SSE for more than 10 years and also chairs the engineering services firm John Wood Group, will join Thames Water’s board on 1 December and become chairman on 26 January.

Thames Water said it had been able to defer corporation tax because of its capital investment programme – which includes a £4.2bn, 15-mile sewer under the Thames.

But critics note that about £1.2bn has been taken out of Thames Water in the form of dividends in the past 10 years. Its owner over that period, the Australian investment bank Macquarie, which sold its final stake earlier this year, landed it with £10.75bn of debt financing. In March, Thames Water was fined a record £20.3m after huge leaks of untreated sewage into the Thames and on land.

Marchant succeeds Sir Peter Mason, who became chairman in 2006 and delayed his retirement last year to help the company through a transitional phase with the arrival of a new chief executive, Steve Robertson, and chief financial officer, Brandon Rennet, as well as new investors.

New shareholders include the Universities Superannuation Scheme, one of the UK’s largest pension funds, which has acquired a 10% stake and is pushing for an overhaul of governance arrangements and customer service. The biggest shareholder is Canadian pension fund Omers, followed by the BT pension scheme.

Thames Water was a public utility until it was privatised in 1989. In the mid-1990s it was sold to a consortium led by Macquarie.

IMAGE: Seven Mile Beach on Grand Cayman island, Cayman Islands

Thames Water said there was no tax advantage from its two Cayman subsidiaries. Photograph: mikolajn/Getty Images/iStockphoto

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