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Britain’s biggest water and sewage company Thames Water has said it will close its Cayman Islands subsidiaries following months of pressure over its opaque corporate structure.
The company, which provides services to a quarter of the population of England and Wales, has also appointed Ian Marchant, the former boss of power company SSE, as chairman to take charge of a review of the business.
He will assess the company’s “corporate structure and governance to ensure that it is as simple and transparent as possible for its customers and stakeholders”, Thames Water said.
Mr Marchant, who will be paid £325,000 a year for working two days a week, will also look into the company’s pay and bonuses. He replaces long-serving chairman Peter Mason following a string of fines for water and sewage leaks in recent years.
Thames Water is owned by 11 pension and sovereign wealth funds, including the Canadian pension fund Borealis, the Abu Dhabi Investment Authority and the China Investment Corporation. It has a complex corporate structure that involves nine main group companies, two of which are registered in the Cayman Islands. It also has other subsidiaries, including one in Guernsey.
The company paid no corporation tax over the past 10 years while paying dividends of £1.16bn between 2006 and 2015, according to research by the Financial Times earlier this year. In June, it revealed that it paid investors £100m in dividends in 2016-17.
It has become a lightning rod for criticism of an industry that has been accused of pushing up prices for customers and failing to tackle water leaks and pollution targets while paying lucrative rewards to shareholders.
Water companies are now moving to repair their corporate image. Another big utility Yorkshire Water has already announced plans to close its Cayman Islands subsidiaries.
England is the only country that has fully privatised its water and sewerage system: ownership was transferred from the state to 17 large regional monopolies in 1989. Labour leader Jeremy Corbyn has threatened to take water companies back into public ownership.
Thames Water would not say how long the corporate review would take but said that closing the Caymans subsidiaries could take up to two years because international bond investors who may have bought in more than a decade ago would have to be traced.
The bonds were used to raise money to repay borrowing by its former owner Macquarie when it bought Thames from German utility RWE in 2006 for £8bn.
Thames Water said the Caymans 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”.
The company was fined a record £20.3m in March for dumping 4.2bn litres of raw sewage into the river Thames and its tributary the Thame over three years between 2012 and 2014.
This was followed in June by an £8.55m fine for missing its leaks reduction target by 47m litres per day in 2016/17. Despite this Martin Baggs, chief executive of Thames Water until he stepped down last year, received a 60 per cent pay rise in 2015, taking his pay to £2m.