Analysis: Exodus of water executives

The past few months have seen the departure of many a senior person in the water sector. So why are all these bosses quitting now? And what are we likely to see happen next? By Lois Vallely.

It has been a whirlwind of change for the water sector. Along with the deals, mergers, rebrands and market exits, the industry has also said goodbye to many senior figures.

Long-standing water boss Martin Baggs started the ball rolling when he announced on 30 November last year that he will step down as Thames Water’s chief executive in late 2016.

Thames then lost a further three senior leaders as Graham Southall, managing director of Thames Water Commercial Services, and Rupert Kruger, head of business retail announced their intentions to leave the company, and chief financial officer Stuart Siddall said he would retire at the end of 2016.

Then, on 10 June, Luis Garcia said he will step down as Bristol Water’s chief executive, after seven years at the helm. He will remain in post until a new chief executive is found, at which point he will return to Suez Group in a senior role.

Just two months later on 24 August, Southern Water chief executive Matthew Wright decided that, after more than six years, he will exit the company. He’s hot on the heels of the firm’s chief financial officer Michael Carmedy, who quit in March – replaced by William Lambe.

This mass exit from senior water roles, along with Ofwat’s overhaul of its senior team, seems like more than coincidence. So why is it all happening now?

It could have something to do with the imminent opening of the non-household retail market. Perhaps it is a case of getting out before things really shake up.

However, in the case of the three chief executives, it most likely has more to do with allowing their successors to bed in and get to grips with the current price control requirements before negotiations really get going for PR19.

As Baggs said, when he announced he was leaving: “Taking this decision now means that my successor can be in post in time to oversee the crucial task of preparing the company’s business plan for the next regulatory period.”

Meanwhile, in their leaving statements, Garcia and Wright did not give reasons for their departures.

Big things have happened for all three companies recently. Bristol Water lost its appeal to the Competition and Markets Authority in October 2015, which forced the company to lower its bills by 16 per cent for 2015-20, and Southern did what most expected and confirmed its exit from the non-household retail market in June this year, selling its business customer base to the ambitious Scottish retailer Business Stream. Thames followed closely, announcing its own exit in July.

It is not unusual to see changes around the time negotiations begin for a new price control period. Another thing the sector is likely to see is a changeover in the investor world. Current investors are likely to get out and new investors come in during this moment of maximum stability, when they can be sure of companies’ targets for the next few years.

Capstone Infrastructure – which owned a 50 per cent stake in Bristol Water – was itself recently sold to fellow investment firm Icon Infrastructure. And the sector is likely to see further investor shifts in the coming months as the companies begin to negotiate their terms for PR19.

When it comes to replacements, a lot of headhunters are sure to be scouring the market, and other markets, over the next few months.

Thames Water has already found a replacement for Martin Baggs in the form of Steve Robertson, pinched from the telecoms sector. Robertson assumed full control of Thames at the beginning of this month, meaning the firm can now begin its hunt for a new chief financial officer.

And the search for new leaders for Southern and for Bristol Water is “ongoing”.

Bristol Water says the board is managing an independent recruitment process and pursuing “all avenues” to find its next chief executive. Southern Water, which made its announcement much more recently, will not say much on the issue, but insists that: “The timing of the announcement ensures that the search for a successor can begin and that continuity of leadership can be provided through the next price review and investment cycle, which starts in earnest next year.”

Despite their exits from the non-household retail market, Thames and Southern must still be completely astute when it comes to dealing with their household customers. For this reason, Southern could decide to follow Thames, and other big water companies, and recruit someone from telecoms.

Another option would be to recruit someone internally. However, many Southern top bosses have recently left, including the aforementioned chief financial officer, so there is unlikely to be enough experience in the company to take the role of chief executive.

Bristol Water, too, could look to other sectors if recruiting externally. And if recruiting internally, it has a choice of five directors: Mick Axtell, finance director (the most likely contender); Gary Freake, network director; Ben Newby, customer services director; Alan Marvin, production director; or Tom Kiedrowski, interim director of strategy and regulation.

A lot has happened over the past 12 months. The water sector is evolving fast, and is sure to see many more changes in the coming months and years.

BIOGRAPHIES

Thames Water

Outgoing chief executive: Martin Baggs

Baggs took the helm of Thames in March 2010, having been a non-executive director since 2006, when Kemble Water – a consortium of investment funds led by Bagg’s previous employer Macquarie – bought the company from German energy giant RWE. Prior to this he had been an executive director with Macquarie, with responsibility for the portfolio of utility investments across Europe, including Thames Water, and Wales and West Utilities.

A water veteran with previous roles including managing director at South East Water and operations director at Southern Water, he is an engineer at heart, having gained a first class degree in civil engineering from the University of Plymouth.

Incoming chief executive: Steve Robertson

Robertson became chief executive of Thames Water in September 2016, having previously held the position of chief executive at ­Truphone, where he developed ground-breaking technology allowing it to become a disruptive player in the global market.

Prior to joining Truphone, Robertson served as chief executive of BT Openreach from its inception in 2005 until 2010. Robertson held a wide variety of roles in the BT Group and at Colt Telecommunications, including having responsibility for the overall performance and operation of the whole of BT’s UK mainland telecommunications network as managing director of wholesale operations.

Outgoing chief financial officer: Stuart Siddall

Siddall joined Thames Water in September 2011, having previously held the position of chief executive of the Association of Corporate Treasurers.

He joined Price Waterhouse in Johannesburg after qualifying as a chartered accountant. Returning to the UK, he held several senior financial roles and was among the first students to qualify with the Association of Corporate Treasurers.

Siddall has gained experience in the construction, engineering and utilities sectors, including serving as finance director for Amec, Balfour Beatty and Manweb.

Incoming chief financial officer: unknown

Southern Water

Outgoing chief executive: Matthew Wright

Wright joined Southern in February 2011 from United Utilities (UU), where he was managing director of asset management and delivery.

Before that he was managing director of operations at UU, where he was responsible for the operations, maintenance and customer service activities of the regulated water and wastewater business. He was also in charge of the company’s external contracts with Welsh Water, Scottish private-finance initiative projects and other industrial customers.

Wright has more than 25 years’ experience of utility management in both UK and international markets.

Incoming chief executive: unknown

Former chief financial officer: Michael Carmedy

Carmedy joined Southern Water in November 2011 from United Utilities, where he was previously the group controller and finance director. He joined UU in January 2008 from Thames Water, where he worked for 17 years in various financial, commercial and regulatory roles based in both the UK and the US.

Immediately prior to joining UU, he was Thames Water’s financial controller, a role he took up following his return from the US, where he spent four years with Thames Water Americas, including two years as vice president of regulation of American Water.

New chief financial officer: William Lambe

Lambe joined Southern Water in May 2016 from Thames Water, where he held the position of finance director for the Thames Tideway Tunnel.

Lambe has a wealth of financial experience in the UK and overseas and has worked for companies including, KPMG, BG Group, Wolseley and Thames Water.

Bristol Water

Outgoing chief executive: Luis Garcia

Garcia worked in a variety of leadership roles in South America and Spain before joining Bristol Water in 2009. He joined Aguas de Barcelona (now part of Suez Environment group) in 1989, and from 1991 was in charge of the technical department of the South East region.

In 1995 he was appointed operations and capital programme delivery director for Aguas de Cartagena, a subsidiary of Aguas de Barcelona in the north of Colombia.

In 1998 he was appointed managing director of Metroagua de Santa Marta, Colombia, another subsidiary of Aguas de Barcelona in Colombia, and became managing director of Aguas de Cartagena in 2000. He returned to Spain a year later where he was in charge of the South East region, becoming national director for the South and Canary Islands.

Incoming chief executive: unknown