Bentley: Thames was hollowed out

When Sarah Bentley took the helm at the country’s largest water company - mired in problems around the environment, customer care, service delivery and infrastructure - she created an eight-year plan to turn the tide. Two years in, she tells Utility Week it’s going to take “every single day” of those eight years to bring Thames Water up to scratch.

“Aiming for mediocrity, or being average, is not something I’ve aspired to do ever in my career,” Bentley tells Utility Week. “But right now, from being an outlier and laggard in the sector, being average would be pretty amazing actually.”

Bentley has made clear her ambition to get Thames back in the pack performance-wise and recognises no one will be cheering from the sidelines for average. “People want to see us being a leading water company and I would love that for Thames, but I’m also realistic.”

In recent years, Thames has persistently ranked bottom of league tables for customer service and complaints, leakage rates last year were double the sector average and the company has £14 billion of debt. In 2019, with the departure of previous chief executive Steve Robertson, the company was deep in crisis and in need of fresh blood.

Bentley, who joined Thames a year later from Severn Trent, bluntly summarises the state of the company when she arrived: “It had been hollowed out through a combination of poor management decisions, aggressive cost cutting and simply decades of underinvestment.” She stresses that she uses the phrase hollowed out, “consciously and accurately”.

“I’ve said time and time again, there aren’t any quick fixes. There’s been decades of underinvestment and decades of poor decision making and aggressive cost cutting so it’s going to take a long time to fix.

“I will need every single day of the eight year plan to fix it.”

On timings, she is cognisant that despite work being done, there is an inevitable lag before progress is visible – last year’s full-year results, by her own admission “weren’t great” and this year’s are unlikely to make comfortable reading either.

Last week Bentley took the step of publicly acknowledging the slower than expected pace of her plan – partly due to external factors – and said it didn’t “feel right to take my bonus this year”.

Funding the turnaround

Thames had often been held up as the poster child of mismanagement in the sector – with its former owner Australian infrastructure investment group Macquarie being dubbed ‘the Vampire Kangaroo’.

But since Bentley joined investors have put their hands in their pockets to improve core infrastructure, including most recently £400 million on top of £300 million approved in the PR19 settlement. At the time, Ofwat told the company its shareholders would be expected to cough up to replace distribution and trunk mains across London to redress underinvestment in previous years.

It comes as Ofwat has been pushing hard on financial resilience and has flexed its recently granted powers to push companies to not only ensure they are robust to weather any storm, but to make sure customers can see and understand where money is being spent.

“One of the reasons I announced over half a billion of new equity last year was to begin to address the financial resilience challenges that we face at Thames”, Bentley says.

“We’ve always known that operationally we need to really transform the business. But to really turn around we need the right balance sheet, the right financial framework and we need the right regulatory settlement.”

This, she points out can only come with the trust and the credibility Thames must rebuild to have the right to spend customers money.

“The regulators are the stewards of our customers’ money, and we need to make sure we respect that.”

Problems outsourced

One of the first issues for Bentley to tackle was the approach to capital delivery, where she says the “complete process was broken”.

“Big scale investments for water industry programmes, upgrades to sewage treatment – things that have hit the headlines for all the wrong reasons – were outsourced, and not delivering.

“When I joined, the outsourcing relationship had been terminated but there was nothing in its place so we had to build it from scratch, in the middle of Covid-19 and the massive supply chain crisis.”

Leakage repairs were likewise outsourced under a flawed model, which, Bentley explains, incentivised prioritising the easiest to fix leaks rather than ones causing the most impact to customers or losing the most water.

“When leaks were identified they were added to a list, but there was no mechanism to direct that outsourced relationship to prioritise that over any other leak, so in that situation the easiest, cheapest leaks were fixed.”

The first year therefore involved getting the right team in place to put the plan into action but a quickly visible result was the shift in complaints – down 30%. This was achieved by relocating customer service teams back in the UK and growing the teams to respond to more queries – previously 20% of calls were going unanswered.

“It’s no wonder we are at the bottom of the league table. If you’re not answering calls customers aren’t exactly going to say they’re getting a great service.”

Opening up

Bentley admits it has not always been straightforward for customers to access information on. However, she hopes tools such as the near-real-time map of sewer overflows are heading in the right direction by showing people the work being done and how it directly impacts the area they live in.

Thames has been in the centre of the sewage scandal, with Bentley’s attitude of facing into the problems setting the tone for the organisation. She promised to deliver a near-live map of every combined sewer overflow by the end of 2022 and, true to her word, it went live – 24 hours before year-end.

Of its 354 sewage treatment works, Thames is directing investment to upgrade more than 200 during the remaining years of this AMP and into AMP8. These works will be highlighted on the map, to show customers where money is being spent to fix the problems.

“This is a huge proportion of our overall estate we are upgrading,” Bentley says, “That is key to the messaging – the transparency of how and where we are investing.”

The next five years and beyond

With the ink yet to dry on company plans for PR24, there is already intense debate about what future price controls will look like. Bentley sees a need for fundamental shift to focus on, or even consider, water in all facets of decision-making.

“We need to put water right in the heart of the planning regime. I’m encouraged by things that are staring to emerge after the sector’s crusading around the topic – things like having a national water target. We need the national policy statement for water off the drafting slate and into action – every other major infrastructure sector has one and we need one.”

She also stresses that a regulatory framework that allows a longer view to be taken will be essential to reflect the investment decisions taken over more than one AMP, for projects that make years to deliver.

“We need long term planning for long term infrastructure – the clue’s in the name. Those big programmes, such as what RAPID is doing for water resources, need to be pulled out and put into a framework.

“Government, regulators, everyone needs to come together for dedicated projects.”

“We’re in this together – it isn’t a solo sport – it’s absolutely a team sport,” Bentley says of the efforts it has taken, and will continue to be needed to deliver essential environmental improvements.

Albeit, she stresses with the caveat that Thames has a lot of groundwork to do to clean its own act up. “Only then will we have the legitimacy to say, even if I fix Thames we will not  fix the problems that our customers and environment are demanding. We need these structural reforms to properly secure the future for our children.”