The head of Thames Water is in for an abrupt departure amid grappling with a £14bn debt pile

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Thames Water has announced the resignation of its chief executive, Sarah Bentley, with immediate effect as the UK’s largest water company struggles with its massive £14 billion debt pile.

The sudden exit follows growing concerns about the financial stability of the company, which provides water and sewage services to 15 million people in London and surrounding areas. It is understood that the government and regulator Ofwat are monitoring the situation closely.

Last year, the owners of Thames Water, a group of private equity, pension and infrastructure funds, invested £500m in the company – its first equity injection since privatization – and pledged a further £1bn subject to terms. Even then, they acknowledged that “more shareholder support may be required”.

Bentley’s sudden exit will add to concerns about the company’s financial resilience and raise concerns that the government and Ofwat may need to step in.

The CEO of another water company has warned that a financial meltdown could have a “domino effect” and lead to the downfall of other water companies. In December, Offate said it was concerned about the financial resilience of Thames Water, Yorkshire Water, SES Water and Portsmouth Water.

Bentley, who joined Thames Water three years ago with a £3.1m gold hello, will be replaced on a temporary basis by former Ofwat chief executive Catherine Ross, who is now director of strategy and home affairs at Thames, and chief financial officer Alastair. Cochran. Bentley’s predecessor Steve Robertson left in 2020 with £2.8m in compensation.

Bentley was in the second year of an eight-year turnaround plan to address the spill and reduce sewage flows into rivers, a legacy of underinvestment in infrastructure.

But the company has been struggling to make progress, and a Freedom of Information request released this week revealed that the leakage rate from Thames water pipes is the highest in five years. The company will not meet its reduction target this year.

“The foundations for the transformation we’ve laid are positioning the company for future success,” Bentley said in a statement on Tuesday. However, Bentley, which had been queuing up for a £1.6m wage package, agreed in May to forgo its bonus amid concerns about the company’s environmental and customer performance.

Like many water companies, Thames Water is under pressure from rising inflation, including higher prices for energy and chemicals and rising payments on its debt.

Ratings agency Standard & Poor’s has a negative outlook for two-thirds of the UK water companies it rates – suggesting a possible downgrade due to weak financial resilience. More than half of the sector’s debt on average is related to inflation, putting pressure on companies in the current environment.

Water companies have drawn up plans to increase household bills by up to 40 percent to counter rising costs, but it has yet to be agreed upon by Offat, which is concerned about pressure piling on families during the cost-of-living crisis. The water companies will submit their business plans by October with the final decision to be made by 2025.

Southern Water, which serves 4.2m customers across Kent, Sussex and Hampshire, has been saved from the brink of bankruptcy after Australian asset manager Macquarie agreed to step in and take majority control of the company in 2021 in a confidential deal agreed with Ofwat.

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Martin Young, an analyst at Investec, said the CEO’s resignation at a crucial time was “suboptimal”. The challenges facing the water industry and some of the companies within it are well known. The next regulatory period is likely to see higher levels of investment across the industry, with potential billing implications.”

Gary Carter, the GMB’s national officer, said the resignation highlighted “the precarious situation in the waters of the Thames”.

Shareholders urgently need to put the company first and unlock funds [needed] To keep the infrastructure and manpower of this vital public resource from collapsing.”

Ofwat said on Tuesday it would seek assurances about the company’s continued commitment and ongoing plans to improve its operational, customer and environmental performance and [its] Financial flexibility.

Ian Marchant, chair of Thames Water, said Bentley had built a “first-class executive team” and led “the first phase of the company’s transformation”. He added that the company will look for a new CEO.

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