Showing posts sorted by date for query THAMES WATER. Sort by relevance Show all posts
Showing posts sorted by date for query THAMES WATER. Sort by relevance Show all posts

Saturday, October 26, 2024

PRIVATIZED WATER

Thames Water secures $3.9B loan to keep it afloat through October 2025



Thames Water, Britain's largest water utility, announced Friday it had secured a $3.9 billion lifeline, access to cash reserves and extensions on its liabilities to keep it afloat for the next 12 months as it battles to restructure a $20.8 billion mountain of debt. File photo by Terry Schmitt/UPI | License Photo

Oct. 25 (UPI) -- Britain's embattled Thames Water, the country's largest water utility, announced Friday it had secured a $3.9 billion line of credit, access to cash reserves and extensions on its debt to keep it afloat through October 2025 after regulators capped bill rises.

The company, which serves 16 million homes and businesses in London and the southeast, said in a news release that it had launched a "consent process" on a transaction support agreement with its creditors and shareholders that if approved would provide a significant boost to Thames Water's "liquidity runway."

It said completion of the Liquidity Extension Transaction and the related Security Trust and Intercreditor Deed proposals would improve the solvency position of the business sufficiently "to enable us to continue with the planned investment and maintenance of our infrastructure in order to continue to meet customers' needs, and our environmental responsibilities."

The deal buys Thames more time to restructure a $20.8 billion debt mountain that it admitted would climb to $23.3 billion by the end of the financial year in March.

Related
British water companies ordered to repay $139M to customers for poor performance
Britain's Thames Water secures $960M cash injection amid nationalization threat
Britain weighs taking Thames Water utility into public ownership
British water utilities seek approval for $117B modernization plan paid for by higher bills
British water companies ordered to repay $139M to customers for poor performance

But Thames said it would also allow it to progress its equity raise process, a recapitalization transaction and complete a final determination process to figure out if a five-year Ofwat package of price controls, service requirements and incentives is workable -- and if not, to appeal to the antitrust regulator.

Launching an appeal with the Competition and Markets Authority would further extend the transaction, keeping Thames liquid for another seven months through May 2026.

The BBC reported that the deal centered on existing creditors agreeing to take a haircut.

Last month, Thames warned it could run out of money by December after Ofwat, the water industry regulator, placed it in special measures and denied it permission in July to hike customers' bills -- initially by 43% by 2030 and then 53% -- that the company said it needed to avoid going bust

Thames and 15 other water utilities in England and Wales wanted to cover the $135.7 billion cost of modernization plans to maintain quality drinking water, build 10 new reservoirs and cut water pollution by raising annual bills by $187 over the next five years.

But Ofwat capped the rise at $122 amid public anger over poor performance including the loss of billions of gallons of water through leaks, raw sewage spills into rivers and lakes and polluted swimming beaches.

Thames was allowed a 23% raise meaning the average bill will rise to $695 a year.

The cap is linked to a September 2023 ruling in which Ofwat said 11 of the water companies must pay their customers back a combined $139 million in 2024 through lower bills as a penalty for "underperformance" on pollution, leaks and customer service.

As the largest water utility by far, Thames had to pick up 90% of the tab or $122.7 million after their performance was assessed against annual targets for 2022 to 2023 and found "seriously wanting." It was among seven water companies judged as "lagging, with the other four deemed only "average" and none were categorized as 'leading.'"

However, CEO Chris Weston hailed Friday's announcement as proof of the progress Thames, which has a $20.8 billion debt mountain, was making toward getting back onto a more stable financial footing, stressing that the company had also upped Ofwat-verified service performance levels

"We are working closely with and have the support of our creditors, enabling Thames to continue to implement our turnaround plan so that we can deliver better results for our customers and the environment whilst seeking to attract new capital into the business," said CEO Chris Weston.

"In the meantime, our teams on the ground continue to supply our services to our 16 million customers every day."

Thames Water Chairman Sir Adrian Montague said the finance injection was an important step in the process of bolstering the company's long-term financial resilience.

"There will be further stages and we will continue to work collaboratively with our many stakeholders as we look to attract new equity into the business and seek a final determination that enables the delivery of our ambitious business plan for the next five years," said Sir Adrian.

Tuesday, October 22, 2024

UK 

Water companies push for higher bills again as customers face up to 84% hike

Thames Water has asked to raise its bills by 53 per cent by the 2029-2030 financial year (EPA)

Howard Mustoe
Tue, October 22, 2024
THE INDPENDENT

Water companies are lobbying for bill rises of up to 84 per cent in the next five years in a fresh blow to customers.

Firms including beleaguered Thames Water have applied to the regulator, Ofwat, to hike tariffs so they can upgrade their networks, often after years of underinvestment.

The increases will also pay for higher energy costs since pumping water around the country uses plenty of power, as does treating sewage. Energy costs make up around a tenth of water companies’ costs.


Southern Water wants bills to rise the most from today’s prices, by 84 per cent, with Thames Water asking for a 53 per cent rise. Northumbrian water has requested the least, at 21 per cent for the 2029-2030 financial year.

Since being privatised in 1989 by the then Conservative government, many water companies have been accused of underinvestment and paying large dividends to their new owners.

Thames Water has come in for particular scrutiny because of its parlous financial position. It has been teetering on the edge of collapse and is trying to raise money from its investors.
Southern Water is asking for the largest bill hike, a rise of 84 per cent 
(Chris Ison/PA) (PA Archive)

The company has £15bn of debt and it is in talks with 90 of its creditors who hold about two-thirds of those borrowings.

The companies have also been criticised for the amount of raw sewage that has been dumped into rivers and the sea.

The firms can release sewage when rainfall is high to prevent flooding, but these releases have grown in frequency and have led to more beaches being shut.

The Environment Agency has warned against swimming at 24 sites in the UK because of drops in water quality, warning of the risk of sickness for those who do.

Earlier this month Ofwat said water companies were being hit with £157.6m in penalties after they missed pollution and leak targets. Thames Water accounted for more than a third of the fines at £56.8m.

The firms’ poor performance has led to calls for the companies to be renationalised, but that would cost £99bn, an unlikely figure given Chancellor Rachel Reeves’ plan to shore up public finances.

Baroness Hayman, a Department for Environment, Food and Rural Affairs (Defra) minister, told the House of Lords last month: “Given the significant costs attached, the Government has no intention to nationalise water companies.”

Labour vowed to “put failing water companies under special measures to clean up our water” in its 2024 general election manifesto.

Ofwat will make a final decision on water companies’ plans to raise bills from 2025 to 2030 in December.


Monday, October 21, 2024

UK

Bonus payments to water company bosses rise to £9.1m amid sewage scandal


It was not just bonus pay that increased but pension contributions too, according to Lib Dem analysis of Company House records.


Sarah Taaffe-Maguire
Business reporter @taaffems
Monday 21 October 2024 

Bonuses to water company bosses rose this year to £9.1m - despite record sewage discharges and financial woes at some utilities.

Executives from English and Welsh water firms received a total of £9,126,858 in the 2023/2024 financial year, up from £9,012,777 a year earlier, according to analysis of company filings done by the Liberal Democrats.

When base pay and pension contributions are factored in, total payments to executives reached more than £20m - slightly less than the year before when full remuneration was £20.2m.

Pension contributions also increased to £1.68m from £1.55m.

Base pay alone for water company seniors was more than £9.2m, less than the £9.7m recorded 12 months before.

It comes as a record number of sewage discharges went into British waterways.

Latest figures from the Environment Agency showed discharges of untreated sewage by water companies doubled from 1.8 million hours of discharges in 2022 to a record 3.6 million in 2023 while 464,000 individual spills were recorded - up from 301,000.

Under current rules, water companies can discharge sewage from storm overflows, but only during periods of heavy rain and under strictly permitted conditions.

Meanwhile, the UK's biggest water provider Thames Water faces nationalisation with experts saying the company is "uninvestable" as shareholders pull their investments, while its holding firm has defaulted on some of its £16bn debt pile.

Previous chief executive Sarah Bentley resigned just a day before news of a possible collapse of Thames Water came to light.

Who paid the most?

Despite the tough financial times, the utility was one of the companies that increased bonuses.

Bonus payouts nearly doubled from £746,000 in 2022/2023 to £1.26m in 2023/2024.

The biggest bonuses were paid by Severn Trent, who gave three executives £3.36m in bonuses, an increase from £3.319m year-on-year.

Calls for more regulation

The Liberal Democrats are calling for an immediate ban on bonus payments at all water companies while sewage outflows continue.

The party says it is pushing for a parliamentary vote to ban bonuses by tabling an amendment to the government's water (special measures) bill.

The bill has been introduced as part of the government's efforts to crack down on pollution and financial mismanagement in the water industry.

Proposals in the bill include the ability to jail executives and increased compensation for customers.

Thursday, October 17, 2024

UK

Super sewer: Thames Water customers will pay £25 annual levy for another two decades to fund £4.5bn project


Ross Lydall
Tue 15 October 2024 


Thames Water customers will pay a £25 levy on their bills for about another two decades to repay the cost of the £4.5bn “super sewer”.

The 15-mile pipeline, which was officially declared in use on Monday, more than eight years after construction began, is being funded through a surcharge, currently three per cent, on domestic water bills.

A decade ago, when the project was first envisaged, Tideway, the firm that has built the super sewer, and Thames Water committed to charging “no more than £25 a year” at 2014/15 prices.

Andy Mitchell, chief executive of Tideway, said the project – which will drastically reduce the amount of raw sewage that ends up in the Thames - was “like a mortgage arrangement that quietly will be paid off over decades”.

How the super sewer works (Tideway)

Speaking to The Standard on Monday, Mr Mitchell said: “We believe this year that it will be at its peak. It will fall away thereafter.

“Quite at what pace it falls away really will be a matter between Tideway and Thames Water and the regulator every five years, to decide what should happen over the coming five years.

“It’s variable and decisions will be made in future decades as to how long that carries on.”

Thames Water has been approached for comment.

The project has created seven new public “piazzas” along the riverbank, including at Putney, Chelsea, Vauxhall, on the Victoria Embankment and beside Blackfriars bridge.

The space at Blackfriars – the largest of the seven - will be named Bazalgette Embankment, in honour of Joseph Bazalgette, the Victorian engineer who created the capital’s first sewage system.

“We don’t think he got enough credit for what he did, so we have been able to get that named after him,” Mr Mitchell said.

“This will be a continuation of what Bazalgette did. We hope it’s a place that people will enjoy for many, many decades to come.

“We have the Victoria site opposite site opposite the London Eye, which is going to be a fantastic site in future years to see the fireworks on New Year’s Eve.”

The original layout for Cycle Superhighway 3 will be reinstated next summer (TfL)

The capital’s flagship cycle route, the CS3 cycle superhighway, now known as cycleway 3, along the Victoria Embankment, is expected to be fully reinstated next summer, when Tideway vacate its riverside work site between Embankment Tube station and Blackfriars bridge.

Construction works have required the narrowing of the cycleway near the Tube station and the re-routing of the westbound and eastbound ramps that allow cyclists and vehicles to move between Blackfriars bridge and the Embankment.

Mr Mitchell said: “We are talking to TfL and have agreed that they will do that reinstatement. We are paying for it, but they will do it. Because we are demobilising it makes more sense for them to do it.

“As we finish that site next summer, we will vacate the space. That will allow TfL to put the superhighway back where it was before we started.”


The new piazzas that have been created on the Albert Embankment (Tideway)

The super sewer’s flood defences are operating in four out of 21 sites, all in west London – Acton, Barn Elms and two portals at King George’s Park.

Next week the central London portals at Victoria Embankment, Blackfriars Bridge and Albert Embankment are expected to come on stream.

All 21 sites should be in use by the end of the year. “We are hoping another six to eight weeks and we will be there,” Mr Mitchell said.

During heavy rainfall, they will direct overflows into the super sewer, which has been dug under the river between Hammersmith bridge and Limehouse, and takes the discharges direct to Beckton sewage treatment works in east London.

Prior to the super sewer opening, untreated sewage was discharged into the Thames about 60 days a year.

Mr Mitchell said: “This is going to make a fundamental difference into the health of the river.”

Asked about London mayor Sadiq Khan’s plan to make the Thames swimmable within a decade, Mr Mitchell said the super sewer would make it much cleaner – but he wouldn’t personally want to swim in the river.

He said: “If you are out there swimming in the tidal Thames, with all the traffic and a 7m tide range and the fast currents, arguably the quality of the water is the least of your problems. It’s not an advisable place to swim.

“But on the point of: ‘Will the water be an awful lot cleaner?’ Yes, it will.

“Technically, this water would be of a condition that – if that was the only consideration – you could [go swimming]. I wouldn’t.


Sunday, October 13, 2024

Starmer sucks up to bosses and angers unions on Labour’s 100th day in office

The Labour government says it's had ‘warm engagement’ with DP World bosses who sacked 800 P&O Ferry workers two years ago


Workers march against P&O bosses in Dover in April 2022 
(Picture: Guy Smallman)


By Tomáš Tengely-Evans
Saturday 12 October 2024 
SOCIALIST WORKER Issue

Keir Starmer marked Labour’s first 100 days in office on Saturday by siding with bosses who’d sacked hundreds of workers on the spot.

Transport secretary Louise Haigh had described P&O Ferries—which sacked 800 workers in a brutal fire and rehire in 2022—as a “rogue operator”. “I’ve been boycotting P&O Ferries for two-and-a-half years and I would encourage consumers to do the same,” she said on Wednesday.

Her comments came the day before Labour unveiled its Employment Rights Bill, which is a step forward but falls short on the party’s pledges. It promised to “end unscrupulous fire and rehire practices”, but wouldn’t ban bosses from using the vicious tactic.

That still outraged DP World—P&O’s owner—which threatened to pull a £1 billion investment into the Thames Gateway port project on Friday.

Starmer slapped down Haigh in a BBC interview, saying, “Well, look, that’s not the view of the government.”

Whitehall sources told BBC News that there was “warm engagement” between senior figures in the firm and the government since Starmer’s criticism.

DP World bosses will now go to the International Investment Summit on Monday. Starmer, chancellor Rachel Reeves and business secretary Jonathan Reynolds are preparing to court big business at the conference.

Reeves and Reynolds supported “intense lobbying” from bosses to water down protections in the Employment Rights Bill.

Starmer is desperate to regain control after almost a month of scandals surrounding luxury gifts. Morgan McSweeney—a ruthless Labour right winger—was appointed as his chief of staff last week after Sue Grey was pushed out.

But the sense of panic remains for Labour and is opening up potential divisions. One ally of Haigh described the briefings as “disgraceful” and suggested the circle around the prime minister “are running out of friends.”

Labour’s support for big business is driving more tension with the unions, which had been more than willing to “give Labour a chance”.

Matt Wrack, FBU firefighters’ union general secretary, slammed Starmer’s criticism of Haigh as “unacceptable”. “Louise Haigh has the full support and solidarity of the FBU in setting out clear opposition to P&O and other rogue employers,” he said.

“Any backlash or briefing against Labour politicians and trade unionists who challenge or clamp down on firms that have been exploiting and abusing workers in that way is completely unacceptable, wherever it comes from.”

He added, “It’s outrageous that DP World is seeking to derail the extension of employment rights that Labour was voted into government to deliver.

“Rogue employers and corporate bullies cannot be allowed to hold a democratically elected government to ransom.”

A new YouGov poll this week showed that half of Labour voters are disappointed in Starmer’s government.

Starmer unpopularity goes deeper than the gifts scandal because Labour is committed to austerity mark 2 ahead of the budget on 30 October.

Labour MPs, including “soft left” figures such as Haigh, voted to keep children in poverty and snatch winter fuel payments from pensioners.

Earlier this week Wrack addressed an FBU rally of over 1,000 firefighters, who demanded Labour breaks with austerity.

He described the Labour government as an “opportunity” after 14 years of Tory rule. “The question is whether we seize that opportunity to fight for better conditions,” he said.

He warned “those who think it’s going to be easy under a Labour government”, pointing to the Tony Blair government’s attacks.

The Labour government is dashing hopes for what little change it promised, as it sucks up to bosses and prepares for a new round of austerity.

But struggle outside parliament—on the picket lines and streets—can win the transformative change working class people need. Let’s seize that opportunity by fighting back.

Tuesday, October 08, 2024

UK

Water firms ordered by Ofwat to pay back customers more than £157m
Sky News
Updated Tue 8 October 2024 at 3:23 am GMT-6·3-min read




Water firms in England and Wales have been ordered to return £157.6m to customers due to their poor performance.

Ofwat said the money would come off bills for households and businesses in 2025-26, with the total rebates set to be calculated in December.

Last year, the water regulator ordered firms to repay £114m as part of a similar move.

Ofwat said the results of its annual report on water company performance showed "disappointing results" and that money alone was not enough to address the problems facing the industry.

The regulator also warned that firms were "falling further behind on key targets", with nine out of 11 suppliers experiencing an increase in "pollution incidents" in 2023.

It comes as water bills in England and Wales are set to rise by an average of 21% over the next five years.

Ofwat's chief executive David Black said: "This year's performance report is stark evidence that money alone will not bring the sustained improvements that customers rightly expect.

"It is clear that companies need to change and that has to start with addressing issues of culture and leadership. Too often we hear that weather, third parties or external factors are blamed for shortcomings."

He added: "Companies must implement actions now to improve performance, be more dynamic, agile and on the front foot of issues. And not wait until the government or regulators tell them to act."

Ofwat's report also found that while there had been progress made on leaks, firms had only managed a 6% annual reduction – against a target of 16% by 2025.

However, four water companies – South East Water, South West Water, Thames Water and Yorkshire Water – were upgraded by the regulator from "lagging behind" to "average", but it said performance improvements were inconsistent across the sector.

Anglian Water, Welsh Water and Southern Water were all categorised as "lagging behind".

No firm managed to achieve the regulator's top rating of "leading".

Matthew Topham from We Own It, which is campaigning for the nationalisation of the water industry, said: "Today's action, while a welcome respite from skyrocketing bills, exposes the Catch-22 at the heart of water privatisation.

"Water firms, which desperately need cash to stay afloat, let alone invest to end sewage pollution, will rightly hand back millions they've unfairly taken from the public.

"[But] rather than punishing the shareholders behind these failures, our rivers and seas will suffer from even greater underfunding, and the public from future bill hikes in following years, to cover these costs."

Earlier this summer, the regulator announced it was investigating all wastewater companies due to concerns that some may not be meeting their obligation to minimise pollution.

In August, Ofwat announced that three firms - Northumbrian Water, Thames Water and Yorkshire Water - were facing a combined fine of £168m for a series of failings, including over sewage treatment.

Last year, industry body Water UK apologised on behalf of firms for "not acting quickly enough" on spills.

Years of under-investment by privately-run firms combined with ageing water infrastructure, a growing population and more extreme weather caused by climate change have seen the quality of England's rivers, lakes and oceans plummet in recent years.

Some water utilities are also creaking under high levels of debt or face criticism over dividends to shareholders and executive bonuses.

Environment Secretary Steve Reed said: "Our waterways should be a source of national pride, but years of pollution and underinvestment have left them in a perilous state.

"The public deserves better. That's why we are placing water companies under special measures through the Water Bill, which will strengthen regulation including new powers to ban the payment of bonuses for polluting water bosses and bring criminal charges against persistent law breakers.

"We will be carrying out a full review of the water sector to shape further legislation that will fundamentally transform how our entire water system works and clean up our rivers, lakes and seas for good."


Friday, September 27, 2024


Thousands of seals making Thames Estuary their home



A seal rests on the banks of the Thames in Hammersmith in March 2021

Almost 600 harbour seals and 3,000 grey seals now live in the Thames Estuary, the Zoological Society of London (ZSL), which runs London Zoo, has revealed.

Taking to the air and sea, ZSL conducted surveys by observing the seals from boats along the estuary and from RAF training flights above the coastline between Suffolk and Kent.

ZSL’s Hannah McCormick, who led the survey, said: “During the 2024 seal survey, we counted 431 harbour seals and 714 grey seals laying out on sandbanks along the Thames.

"By combining these with the number of seals estimated to stay in the water during the counts, we can estimate that there are a total of 599 harbour seals and 2,988 grey seals."
ZSL
Conversationist Hannah McCormick during the seal survey


“Seals are playful but shy creatures, so using a long-range lens to take photos from a distance allows us to maximise our counting accuracy while also minimising any disturbance – helping us build the strongest possible understanding of how these native species are faring in the Thames, and highlighting the importance of protecting this ecosystem.”

The count was completed over several days in August during the moulting season for the harbour seals.

Over the course of those weeks, the seals would have spent much of their day basking on the estuary’s sandbanks, making it easier for the survey team to spot them.

The Thames is home to both harbour and grey seals, although harbour seals are the only one of the two to breed in the area.

ZSL
Seals spotted on sandbanks during the survey in August


This year’s survey was consistent with results from the last few surveys, with 692 harbour seals and 3,134 grey seals having been estimated in 2021.

Ms McCormick explained: “We’ve seen UK seals make an incredible recovery from the early 2000s, when high rates of distemper virus led to steep declines in numbers.

"Results since 2018 suggest there has been a decline in harbour seals, which has also been seen in other harbour seal colonies in the east of England."


This seal kept returning to the banks in Hammersmith, west London, for a week in 2021 - prompting attention from residents


She added: "While the causes of these declines remain unknown, experts are investigating potential factors and by keeping a close eye on these changes.

"We will continue to build our knowledge of seals in the Thames while contributing to long-term regional and national data on seals.”

A ZSL-led report previously revealed that although the Thames was declared "biologically dead" in1957, conservation efforts had led to it once again becoming home to a wide variety of British wildlife including seals, seahorses and critically endangered eels.

Saturday, September 21, 2024

UK
We are currently witnessing the re-privatisation of water

If despite predatory practices and huge extraction of returns, private companies are guaranteed to be rescued by the state, why should directors act responsibly?



Yesterday
Left Foot Forward.

The 1989 privatisation of England’s water industry is “an organised rip-off” and an unmitigated disaster. Water Companies have neglected investment in infrastructure and dumped tons of raw sewage in rivers, lakes and seas. As monopoly suppliers they have levied inflation-busting charges on customers; paid over £85bn in dividends and borrowed over £65bn to finance them. Over 28% of sales revenues vanish in servicing debts. Major companies have gearing ratios ranging from 500% to over 1,000%, and are struggling make debt repayments. Water regulator Ofwat and the Environment Agency have done little to curb predatory practices.

A crisis point has been reached. Water shareholders are writing off investment, debt is rated as junk, and Thames Water, England’s largest water company, is actively seeking to restructure its debts.


Special Administration Regime


Privatisation can only be ended by the state, but governments in bed with corporate interests are delaying the inevitable. Legislation for putting water companies into Special Administration Regime (SAR) is already in place. It enables the Secretary of State to put a failing water company into special administration whilst continuing to provide water and sewage services to customers. It enables the special administrator to ‘hive-down’ the operating business and assets into a new entity, facilitating a sale of a going concern business to a new purchaser and potentially leaving unwanted assets and liabilities behind in the seller group. Inevitably, shareholders and creditors will lose some value, but why would another buyer step in without guarantee of profits and subsidies to build infrastructure?

The SAR regime may be seen as a form of temporary nationalisation, but a Minister told parliament: “We have no plans to nationalise Thames Water or other water companies”.
Special Measures

The government’s strategy is to manage public anxieties and fatten-up failed companies for (re)privatisation. This is facilitated by the Water (Special Measures) Bill currently going through parliament. Clause 10 of the Bill enables Ministers to do almost anything to restructure water companies and hand them back to the private sector. It enables Ministers to modify water company licences. The explanatory notes accompanying the Bill state that

“The modifications can require a water company to raise amounts of money determined by the Secretary of State from its consumers, and to pay those amounts to the Secretary of State to make good any shortfall…”

What could the shortfall relate to? The Bill does not explain but it could be the cost of government interventions to make the company fit for purpose or resale. It could include cost of cleaning-up rivers, seas and lakes, writing off liabilities, providing sweeteners to potential buyers, and funds for investment, loans and guarantees. It is hard to see how companies are going to make the proposed £260bn investment in infrastructure without massive hikes in customer charges and/or public subsidies.

The government has stated that: “These powers would never be used to pay bondholders, shareholders or creditors … we do not expect customers to pay the price for water companies’ mismanagement … measures in the Water Bill will protect taxpayers”.

At the same time, the government has stated “that that the Secretary of State may provide financial assistance”.

It is hard to reconcile these statements.

The press release accompanying the Bill omits discussion of any of above issues. The Water (Special Measures) Bill also contains measures to improve accountability, governance and regulatory compliance of water companies. Regulators can bring criminal charges against law-breaking water executives, including imprisonment for failing to co-operate or obstruct investigations.

Since 2020, water chief executives have paid themselves over £41m in bonuses, and regulators will be empowered to ban bonuses for persons holding senior roles where companies fail to meet required standards relating to consumer matters, the environment, financial resilience or criminal liability. The government promises that regulators will consult experts covering areas such as the environment, public health, consumers, investors, engineering, economics and campaigners.
Special Measures are not so Special

The proposed governance reforms are fundamentally flawed. They rely upon regulatory bodies, such as Ofwat and the Environment Agency, to invigilate companies even though they have already failed in that task for the last 35 years. None owes a ‘duty of care’ to people.

For any system of regulation to be effective, there needs to be a distance between regulators and the regulated. However, that is not the case in the water industry. For example, two-thirds of England’s biggest water companies employ key executives who had previously worked at Ofwat. Executives of water companies and regulators regularly meet in hotels and private members’ clubs to discuss how to quell public anger over bill rises and sewage dumping. Collusion and cognitive capture is the order of the day.

Regulators are too close to the industry, as evidenced by the Pricing formula, codenamed PR24, used by Ofwat. It takes no account of the level of sewage dumping, unplugged leaks, lack of investment or frequency of regulatory sanctions. It uses a weighted average cost of capital based on fictitious gearing levels to inflate returns to shareholders. It guarantees real returns to companies and does little to protect customers or the environment. The regulatory independence is undermined by the regulator’s secondary statutory objective to promote growth and competitiveness of the industry. This conflicts with the requirement to protect customers and the environment.

Ministers claim that: “customers will have the power to summon board members and hold water executives to account through new customer panels with teeth”.

These panels will be handpicked by companies and/or regulators and will have no independence. If the government is serious about customer representations, it must ensure that at least 50% of the unitary board of water companies and regulators is directly elected by customers. Thus, they will be accountable to stakeholders and cannot be bullied or silenced by Ministers, regulators or companies.

Curbs on executive bonuses may excite some but won’t be effective. Any link to “financial resilience” requires regulators to specify and enforce optimal gearing/leverage levels, borrowing capacities, credit ratings, working capital ratios, capital adequacy and routinely undertake stress tests. How exactly will “resilience” be secured – by exploiting customers or shareholders providing a strong capital base? Ofwat have never shown any interest in such matters and has no independence or capacity to monitor or enforce the required financial standards. The Bill provides no details and matters will inevitably be negotiated behind closed-doors to the lowest common denominator.

Companies can bypass any bonus ban by increasing the basic salary of executives. Companies such as Thames Water are part of a complex corporate structure. It is perfectly feasible for their controllers to offer executives multiple directorships to compensate for loss of any bonus. It isn’t just bonuses, salaries may be undeserved too. The best way to deal with that is to empower customers to vote on executive pay. If customers are satisfied that executives have served the public interest they would approve salaries and even bonuses for extraordinary performance.

Regulators bringing criminal charges against law-breaking water executives are a good idea but the Bill camouflages reality. In practice, most of the sewage dumping is authorised by regulators as poor infrastructure can’t cope with the flows. Directors also have insurance to cover them for negligence in the pursuit of corporate objectives. The cost is woven into customer charges. The chances of directors personally bearing penalties are low, assuming that regulators succeed in securing convictions.

The Bill does not constrain water company ability to pay dividends. In March 2023, Ofwat announced that it is taking powers to enable it to stop the payment of dividends if they would risk the company’s financial resilience, and take enforcement action against water companies that don’t link dividend payments to performance. Despite sewage dumping and unplugged leaks, companies have continued to pay dividends. Under the Companies Act 2006, dividends can only be paid out of distributable reserves, which are essentially realised profits, but water companies do not disclose their distributable reserves. Such reserves are routinely inflated by financial engineering, such as capitalisation of some interest payments and repair and maintenance costs. Ofwat has taken no steps to curb financial engineering.

The Water (Special Measures) Bill may make minor difference but it essentially is part of political manoeuvrings designed to avoid bringing the failed water industry into public ownership as neoliberal state continues to guarantee corporate profits.

Private ownership of monopolies can’t resolve the crisis which is due to profiteering, excessive dividends, exploitation of customers and lack of investment in infrastructure. The new owners would enjoy a state guaranteed monopoly and want a return on investment. Thus, a continuing crisis and conflict with the general public is inevitable.

The Bill provides a thinly disguised framework for bailing out (and in) companies and returning then to the private sector. Cost will be borne by customers and/or the public purse. Reforms to governance lack details and their enforceability must be doubted. Reprivatisation introduces new moral hazards. If despite predatory practices and huge extraction of returns, private companies are guaranteed to be rescued by the state, why should directors act responsibly?

Prem Sikka is an Emeritus Professor of Accounting at the University of Essex and the University of Sheffield, a Labour member of the House of Lords, and Contributing Editor at Left Foot Forward.

Saturday, September 07, 2024

UK
Government criticised over Thames wastewater plan


Luxmy Gopal
BBC London
James W Kelly
BBC News

The Thames Water proposal would see treated wastewater pumped above Teddington Lock

The government has faced criticism over this week's approval of plans to pump treated wastewater into the River Thames in south-west London.

The Teddington Direct River Abstraction (DRA) would see treated sewage pumped into the river above Teddington Lock through an underground pipeline from Mogden Sewage Treatment Works.

Twickenham MP Munira Wilson said the Thames Water scheme could damage the the environment and human health.

Thames Water and the government say the plan is needed to help address the "skyrocketing" demand for water.

The scheme would provide up to 75 million litres of water a day during droughts and dry weather, but it would not be designed to run at these levels all year.

When submitting the plans for approval last year, Thames Water said it was the "cheapest" option available to provide enough water to increase drought resilience in London to a one in 200-year level.

It predicts it will need an extra billion litres of water a day by 2075 to account for climate change and growing population demand.

Former Olympic rower Ian McNuff, who lives along the River Thames in Teddington, told BBC London: "The more we looked at it and the more questions we asked, the more uncomfortable we became.

Ian McNuff says the plans are "not good enough"

"They cannot guarantee that they will cause no harm. They 'think' it will be as good as it is now but that's not good enough."

A Thames Water spokesperson said that no untreated sewage water would be pumped into the river as part of this scheme and no different to the current water supply system.

'Think again'


Ms Wilson, a Liberal Democrat, said questions about any chemicals that could remain in the river need to be answered before the proposals are taken forward.

"I want the government to think again. There are many other options available that we know Thames Water looked at but rejected because they say it's too expensive," she said.

An online petition launched in January 2023 to reject the plans has more than 30,000 signatures.


The Twickenham MP says questions need to be answered


The Department for Environment, Food and Rural Affairs said the plan was needed to meet increased water supply needs that come with "rapid population growth" in the south east and climate change.

It added: "That is why this government is committed to increase our water supply while protecting the environment and public health.

"We are going further by introducing legislation to clean up our waterways, attract private-sector investment for upgrades and speed up the building of water infrastructure."

Friday, September 06, 2024

UK

Water firm announces investment to cut discharges

they had failed to adequately invest in and maintain their networks, leading to repeated releases of raw sewage into the country’s waterways.

David Mckenna
BBC News
Yorkshire Water
Yorkshire Water said it is spending £3.4m to reduce discharges to the River Humber


Yorkshire Water said it is investing £3.4m to improve and upgrade storm overflows in two parts of East Yorkshire.

The projects, in Brough and North Ferriby, are part of the firm's £180m investment to reduce discharges and improve water quality in the region.

A spokesperson for the company said it would reduce discharges to the River Humber.

The firm is one of three facing sanctions from the industry regulator, alongside Thames Water and Northumbrian Water, over historic sewage spills.


Commenting on the double scheme, project manager Lumi Ajayi said: “These important upgrades to the storm overflows will prevent infiltration from the Humber and reduce storm discharges and overflows into the estuary during periods of prolonged or heavy rainfall."

It was announced in August that an investigation by Ofwat found that on average Yorkshire Water discharged untreated wastewater into the region's rivers for seven hours a day in 2023, with almost half of its storm overflows found to be in breach of regulations.

It found they had failed to adequately invest in and maintain their networks, leading to repeated releases of raw sewage into the country’s waterways.


Yorkshire Water said it took its "responsibility to protect the environment very seriously".



Thames Water boss 'untroubled' by prison threat - and says he can save company

Chris Weston told Sky News he is confident he can turn around the troubled company, which faces running out of cash in months if it cannot raise fresh equity.

Paul Kelso
Business correspondent @pkelso
Thursday 5 September 2024 
0:53

The chief executive of Thames Water has insisted he can rescue the debt-laden utility, which faces running out of cash in months if it cannot raise fresh equity.

Speaking after the environment secretary announced new legislation threatening water company bosses with jail alongside a review of the industry, Mr Weston told Sky News he was untroubled by the threat of prosecution, and confident he can turn around the troubled company.

"I need to digest what the secretary of state said today, I am completely aligned with what he's trying to do in cleaning up the rivers," he said.

"I'm focused, like he is, on getting investment and I will work with the secretary of state to do that. I am very encouraged by the tone I heard and I will work with him to try to do what he's outlined to do."

Asked directly if he could save Thames Water, he said: "I can save it."

With around £18bn of debt and cash reserves only until next May, Mr Weston is racing to raise fresh investment after existing shareholders withdrew plans for £3.5bn of fresh equity.



Last week the company asked regulator Ofwat to allow it to increase customer bills by more than 50% in exchange for investment of more than £20bn. Previously Ofwat capped future Thames bill increases at 21%.

If Mr Weston fails to raise fresh capital or persuade bondholders to take a loss, Thames Water may fall into special administration, effectively nationalisation, leaving taxpayers liable until it can be sold to new owners.

The current shareholders have written off their investment.

Water companies face customer anger over dividends and bonuses

Thames Water is the most extreme example of the challenge facing the privatised water companies, under acute pressure to reduce sewage outflows and modernise infrastructure using private investment, while limiting bill increases.

They face huge customer anger at the scale of dividends and bonuses paid to shareholders and executives in the three decades since privatisation, payments they argue are necessary to maintain a privatised system.

As well as new legislation giving Ofwat and the Environment Agency enhanced powers, Environment Secretary Steve Reed announced a review of the entire industry that will begin in the autumn.

Water industry figures welcomed the move, believing it would give them the opportunity to make the case that investors require a more generous return than they are currently allowed to offer by Ofwat.

'We all want the same thing'

In the audience to hear him set out his plans were some of the bosses Mr Reed said have paid themselves £41m since 2021 in bonuses and incentives, including Mr Weston and Liv Garfield, chief executive of Severn Trent, the highest-paid water executive.

Susan Davy, chief executive of Pennon Group, which owns South West Water, told Sky News: "We all just want the same thing and we're going to focus on making sure we deliver for communities."

Asked if she was concerned about the threat of prosecution she said: "I'm just going to focus on what's best for communities and customers."

Friday, August 30, 2024

UK
The government must abandon Tory policies and give people hope

Prem Sikka 

Yesterday
Left Foot Forward

The government is continuing with Tory policies which would deepen despair and push more people into the arms of right-wing extremists.



Next week, the UK parliament returns from its summer recess for a two-week session. The Labour government is likely to face considerable scrutiny of policies which have curtailed its post-election honeymoon.

After 14 years of Conservative rule, erosion of household incomes and public services, Labour won the July 2024 election with a promise of ‘change’ though its election manifesto was light on policy details. Whilst it is too early to reach any definitive conclusions, the concern is that the government is continuing with Tory policies which would deepen despair and push more people into the arms of right-wing extremists.

The early sign of continuing with Tory policies is the retention of the two-child benefit cap, introduced by the Conservative government in 2017. It denies child allowances in universal credit and tax credits worth up to £3,455 per year to third or subsequent children born after April 2017. 450,000 households and 1.6m children are affected by the cap. Some 4.3m children, 30% of all children, live in poverty. Abolishing the cap would cost the government between £2.5bn and £3.6bn in 2024/25. Just £1.7bn would lift 300,000 children out of poverty and reduce poverty for another 700,000 children. This would increase family income and stimulate the local economy too. The government was not persuaded and saw off a rebellion in its own ranks by withdrawing the whip from seven Labour MPs.

The government added fuel to anger by abolishing the universal right for pensioners to receive winter fuel payment (WFP) and deprive 10m of payment of between £100 and £300 to cover higher heating costs in winter. The average state pension is between £9,000 and £9.500 a year, which is less than 50% of the national minimum wage. It is the main or the only source of income for most retirees. Nearly 1.4m pensioners receive mean-tested pension credit, worth £3,900 a year. Some 880,000 eligible pensioners do not claim it because they can’t negotiate the regulatory maze, or lack access to computers. Last year £2.2bn went unclaimed.

Despite benefits and the triple-lock, 2.2m UK retirees live in poverty, 2.5m skip meals and 1.3m are at risk of undernourishment. Last winter, despite WFP there were 5,000 excess pensioner deaths as pensioners could not afford to eat and heat. Each year, around 68,000 senior citizens die in poverty.

This abolition of universal WFP was not in Labour’s election manifesto. It was not preceded by any public consultation or warning and no impact assessment has been produced. “The Social Fund Winter Fuel Payment Regulations 2024” which abolishes the universal right is being introduced as a Statutory Instrument and is expected to come into force on 16thSeptember. The new policy is to means-test the WFP and only pensioners with annual income below £11,336 would be receive it if they can fill a 22 page form and answer 243 questions. Two million more pensioners could be pushed into poverty.

The government claims that the new policy would save £1.4bn a year. Such savings are insignificant as the government is expected to spend some £1,226bn in 2024-25. The £1.4bn saving is doubtful as no mention is made of the costs associated with means-testing and dispute resolution. Due to cold and sickness, more pensioners would need hospital admissions and would increase the cost of healthcare. With erosion of incomes, pensioners would spend less and that would damage the local economies. In any case, successful claim of additional pension credits and related benefits by 880,000 pensioners could cost up to £4bn and wipe out the £1.4bn alleged saving.

The government had a number of policy alternatives. For example, it could have introduced a taper, added WFP to total income so that richer pensioners would pay income tax on it and taxed the rich to raise revenues to retain universal WFP. It ignored all alternatives. The loss of up to £300 of WFP comes at a time when household energy bills are set to rise by 10% or around £150 from October. Since March 2021, tax exempt personal allowance has been frozen at £12,570 a year, and pensioners with modest additional incomes are being hit with income tax. Since 2020-21, the number of pensioners paying income tax has creased by over than 2m, from 6.47mn to 8.51m.

It isn’t just pensioners; low income families are also suffering from high energy bills, and cost-of-living crisis, and deserve support. Some 17.8m adults have annual income of less than £12,570. Despite social security benefits 12m people live in poverty. In England alone, some 13% of households (3.17m) live in fuel poverty. A root cause of this is low wages and corporate profiteering. Last year British Gas announced a ten-fold increase in its profits. BP and Shell have made record profits. Since the pandemic, electricity generation companies have increased their profit margins by 198%. The government’s refusal to tackle profiteering will inevitably erode living standards and cause public disenchantment.

Water is another disaster looming and the government is content to leave this monopoly in private hands, just like Conservatives. Despite inflation-busting hikes in customer bills water companies have a long history of under investing, dumping raw sewage in rivers and seas and not plugging water leaks. Since privatisation in 1989, companies have paid more than £85bn in dividends mostly financed by borrowing of more than £60bn. Now they are struggling to service debt and make the required investment. This week Thames water, the UK’s largest water company, with a debt pile of £18bn urged the regulator to hike household bills by 59% or £228 a year. The companies leading shareholders consider their investment to be almost worthless. Its debt is rated as junk.

Public ownership of water industry is widely supported by the public but that is not what the government wants to do. Instead it has offered some gimmicks such as tighter rules to stop polluters from using four-star ratings to justify high CEO pay. In response to my question in parliament, the Minister ruled out nationalisation by claiming that “It would cost billions of pounds”. When asked to share the government’s calculations, the Minister referred me to a 2018 report by Social Market Foundation, a right-wing think-tank, which estimated the cost of water nationalisation to be £90bn. This included £41-44bn for equity. This report is described by a former government adviser as having “virtually no intellectual substance and the [£90bn] figure was wrong”. He added that the process of renationalisation itself would be “relatively easy, as with the revenues from the water bills, the government would have sufficient income to pay for the assets it acquired”. Of course, no government would buy the debt for £46bn.

The minister provided no reference to any government calculation, alternative source of data or anything more recent. For example, in 2019 Moody’s, a rating agency, considered shareholder equity in water companies to be worth only £14.5bn. Since then, if the state of Thames Water is anything to go by, water company shares have become worthless and debtholders are facing major losses. The government is continuing with Conservative policies, by obfuscation.

Elsewhere, the government is committed to further deregulating the finance industry and reducing capital adequacy requirements. It is seduced by claims that this would somehow release £100bn for investment. It is mistaken. There is no pot of gold sitting in boardrooms that can be emptied. The money is held in assets and capital buffers which would need to be liquidated and would inevitably affect resilience of the industry with deadly consequences. The government is also rolling-back on its commitment to protect workers’ rights which could reduce job insecurity. Chancellor Rachel Reeves has promised employers that government will ‘co-design’ reforms with business.

This week, the public backlash persuaded the Prime Minister to make a statement which remained light on policy details, and there is little relief from Tory policies. The government is planning to raise taxes and cut spending in October budget though the Prime Minister promised that “those with the broadest shoulders should bear the heavier burden”. That hasn’t been evident so far from policies on children and pensioners.

The government is committed to economic growth but it is hard to see how that can be achieved without increasing disposable income of the masses and direct state investment in infrastructure and new industries. The government has boxed itself into a corner with its pre-election pledges of not increasing taxes on the rich and additional borrowing. Such promises are not sustainable. The government must abandon Tory policies and give people hope or risk social disorder and pushing more people into the arms of right-wing extremists.

Prem Sikka is an Emeritus Professor of Accounting at the University of Essex and the University of Sheffield, a Labour member of the House of Lords, and Contributing Editor at Left Foot Forward.

Saturday, August 17, 2024

10 ways we could curb undeserved executive remuneration and secure equitable distribution of income

Prem Sikka 
16 August, 2024 
LEFT FOOT FPRWARD
Columnists
Opinion

The High Pay Centre reported this week that FTSE100 chief executive salaries has soared



This week, the High Pay Centre reported that the salary of FTSE100 chief executives has soared. The average FTSE100 CEO’s pay increased from £4.42m in 2022 to record £4.98m in 2023, which is an increase of over £500,000 in one year equivalent to 23 years pay for someone on the national minimum wage. The median pay increased from £4.1m to £4.19m. The median pay of the full-time UK worker is just £28,752, unchanged in real terms since 2008.

81% of FTSE 100 companies paid their CEO bonuses in accordance with a Long Term Incentive Payment plan though the same bonuses are rarely given to employees whose brains and brawn generate wealth. The number of CEOs collecting more than £10m has increased from four to nine. These include AstraZeneca CEO collecting £16.85m; Relx, £13.64m; Rolls Royce, £13.61m; BAE Systems, £13.45m and £10.64m at HSBC.

Higher profits may be good news for executives and shareholders, but not necessarily from a social responsibility perspective. Water companies dump raw sewage in rivers and seas, which boosts profits and executive pay whilst creating health hazards for people. HSBC has a long history of egregious business practices. In December 2021, it was fined £64m for “serious weaknesses” in monitoring of money laundering and terrorist financing scenarios. In January 2024, it was fined £57.4m for “serious failings” over its measures to protect customer deposits. In May 2024, £6.28m fine for failing to give due consideration to customers when they fell into arrears or were experiencing financial difficulties. Rolls Royce is facing a £350m lawsuit over bribery and allegation allegations after previously paying a fine of £497m to settle charges of “12 counts of conspiracy to corrupt, false accounting and failure to prevent bribery”. None of these practices disrupt the executive gravy train.

FTSE 100 firms spent £755m on the pay of 222 executives, but that is not enough for some. The claim is that UK executive rewards are much lower than the US standards and unless the UK executive pay rockets the country risks a brain drain. Such claims are never mobilised to support UK workers even though their median pay has fallen significantly behind workers in other European countries. Ministers and newspapers routinely claim that wage rises for workers, even for those on the minimum wage, are inflationary but that logic is never applied to executive pay.

Executive pay is detached from economic growth, productivity and wage levels for workers. Thomas Piketty argued that today’s chief executives are a generation of “super-managers” who, for the first time in history are able to become independently wealthy by running a public company for a handful of years. They do not necessarily produce wealth but get a disproportionate share. Just look at the UK finance industry which routinely hands mega pay packets to directors. Between 1995 and 2015 it made a negative contribution of £4,500bn to the UK economy, and is routinely involved in scandals.

Executives at poorly performing companies collect megabucks even when they are teetering on the edge of bankruptcy. In theory, remuneration committees staffed by non-executive directors are supposed to check misguided rewards but they have shown no inclination to so, especially as their own lucrative appointments depend on the benevolence of executive directors. The Post Office scandal has once again shown the ineffectiveness of non-execs. The remuneration committee continued to approve bonuses even though the company was engaged in illegal prosecution of postmasters.

The High Pay Centre reported that the typical CEO’s pay is equivalent to 120 times the annual pay of the average full-time worker. This fuels inequalities, concentration of wealth and power and damages social fabric. The rich can fund political parties and think-tanks; lobby policymakers and use social media; own TV and radio stations to advance their interests, whilst the rest of the population can’t and is increasingly excluded from social consumption. Inequalities have severe implications for access to good housing, education, food, pension, healthcare, transport, justice, security, democratic institutions and much more. Households on low income have shorter life expectancy, higher stress, infant mortality, health and psychological disorders.

Successive governments have shown little interest in equitable distribution of income. To appease corporate elites they have resorted to voluntary approaches. Voluntary corporate governance codes such as the Cadbury, Greenbury, Hampel and others have failed to check undeserved executive pay. They are content to rely upon non-execs and shareholders. The shareholder-centric model of corporate governance expects geographically dispersed shareholders to check undeserved executive pay. However, shareholders of listed companies have only a short-term interest in companies and are rarely focused on curbs on excessive executive pay or social justice. Some 57.7% of the shares of UK listed companies are held by overseas beneficiaries and they have no incentive to curb social squalor in the UK. The nine shareholders of Thames Water have shown a voracious appetite for dividends, and none for curbing sewage dumping or executive pay. In family-owned large companies, of which BHS is a good example, it is unrealistic to expect members of the family to vote against the pay of another family member. Even if shareholders vote against executive pay, their vote under UK Companies Act 2006 is advisory rather than binding. At Pearson 47.6% of shareholders voted against executive remuneration policy but it made no difference. It is hard to think of any court case where shareholders have sought to enforce Section 172 of the Companies Act 2006, which requires directors to have regard for the interests of employees, and withhold executive pay or demand a more equitable outcome for employees or consumers or other stakeholders.

A different approach based on democracy and stakeholder empowerment is needed. Here are some suggestions:In the case of banks, insurance, water, rail, energy, internet, mobile phones and many other businesses customers can be identified with certainty and should be empowered to shape corporate governance. Unlike shareholders, workers and customers have a long-term interest in the wellbeing of a company and need to be empowered.
Around 35% – 50% of the members of unitary boards of large companies should be elected by workers and/or customers, or companies could choose German style two-tier boards with the supervisory board elected by workers and/or customers.
Executive remuneration contracts should be made publicly available so that all details are clear.
The remuneration of each executive at large company must be the subject of an annual binding vote by stakeholders, including shareholders, employees and customers. This should encourage directors to ensure that workers receive a good share of the wealth created. Customer vote on executive pay would help to curb predatory practices such as profiteering, dumping sewage in rivers and shoddy services.
The vote on fixed executive salary can be the subject of a simple majority vote by all stakeholders, with at least 50% turnout. Bonuses should only be given for extraordinary performance and subjected to extraordinary approval. At least 90% of the stakeholders must support it, on a 50% turnout.
If 20% of the stakeholders vote against the director remuneration policy, the board must receive a warning to mend its way. If the same happens in the next year then the stakeholders should have the option to trigger a resolution at the general meeting on whether the executive and stakeholder directors, with the exception of the managing director and/or chairman, need to stand for re-election. If this resolution is supported by 50% or more of the eligible stakeholders then a meeting to consider re-election of directors must be convened.
Stakeholders should be given the right to cap executive remuneration. This could be in the form of a multiple of pay ratio (e.g. x times the average wage), or an absolute limit (e.g. not exceeding a specified amount) or in any other form that stakeholders see fit.
The Companies Act must provide a framework for claw back of executive remuneration to ensure that directors are held responsible for any trail of destruction left behind.
Golden handshakes, hellos and goodbyes have all become a way of inflating executive remuneration and must be prohibited. Golden handshakes bear no relationship to any notion of performance and are retained by the executives even though the appointment may turn out to be disastrous. The culture of golden handshakes can encourage a job-hopping mentality and lack of motivation to deliver the long-term welfare of a company. Golden goodbyes are often rewards for dismissed CEOs for poor performance. Payments outside of performance benefit only the executives and not any stakeholder. Such payments must be prohibited, as is the case in Switzerland.
In the case of companies with deficits on employee pension schemes, their directors must not receive any increase in remuneration unless they have reached a binding deficit reduction agreement with the Pensions Regulator.

The above suggestions may not prevent all exploitative practices but provide a sound basis for curbing undeserved executive remuneration and securing equitable distribution of income.

Prem Sikka is an Emeritus Professor of Accounting at the University of Essex and the University of Sheffield, a Labour member of the House of Lords, and Contributing Editor at Left Foot Forward.

Image credit: Marc Barrot – Creative Commons

Monday, August 12, 2024

 

Unexploded Ordnance From the Past Poses a Threat to Ocean's Future

File image courtesy Navigea / RV Petrel
A deck gun aboard the lost WWII carrier USS Wasp, somewhere in the Coral Sea (File image courtesy Navigea / RV Petrel)

Published Aug 11, 2024 2:28 PM by Dialogue Earth

 

 

So many Second World War ships and planes were sunk around Savo Island in months of conflict between the US and Japan, that this stretch of the Pacific Ocean earned the new name Iron Bottom Sound.

Decades later, the wrecks remain and so do their contents and cargos, including toxic chemicals from ammunition, explosives, and fuel. As they corrode and leak in the deep waters off this part of the Solomon Islands archipelago, chemicals such as heavy metals and hydrocarbons leach into the marine environment. These possess possible risks to the surrounding ecosystems and perhaps even human health.

Iron Bottom Sound is just one example of a growing global problem. From Hawaii to the Baltic Sea, researchers are working against the clock to understand the risk to the marine environment posed by these legacy munitions – and what should be done about them.

Many were put into the ocean deliberately, to dispose of unused stocks at the end of conflicts. “They have been dumping munitions in the ocean for a long time,” says Margo Edwards, director of the Applied Research Laboratory at the University of Hawaii, who has studied the problem.

There these weapons have largely lain undisturbed for almost a century, but fishing and other marine activities such as offshore wind power are now increasingly intruding on the sites. And as the munitions corrode, the risk of environmental contamination grows year by year. “It’s kind of our modern life expanding into a decision that was made back in the 1940s, and even prior to that, that’s causing this conflict,” says Edwards.

Bracing for disaster

In some cases, leftover munitions are well known landmarks. The US wreck SS Richard Montgomery, for example, has lain in shallow water in the Thames estuary about 50 miles east of London since it ran aground in a storm in 1944. With its masts clearly visible above the often choppy water, the stricken vessel is laden with an estimated 1,400 tonnes of unexploded ordnance. An assessment in 1970 found that if this blew up, it would trigger a tsunami large enough to engulf the nearby town of Sheerness.

But in many cases, the scale and exact location of the underwater hazards remain unknown. Records have been lost or were never made in the first place. Anxious sailors tasked with disposing of the dangerous leftovers often tipped them into the sea as soon as possible.

For years, the problem has been out of sight and out of mind. But, some experts say, that is no longer the right approach. The metal canisters and boxes that hold many of the dumped explosives have been steadily corroding and are now at increased risk of leakage. If significant numbers were to give way simultaneously, or in a short space of time, that could cause a serious pollution event. At the very least, researchers say, we need better surveys and monitoring so that the level of risk can be properly assessed.

“All the mechanisms are in place for a huge environmental disaster,” says Jacek Beldowski, a geochemist working with ocean-dumped munitions at the Institute of Oceanology, Polish Academy of Sciences. “Everything depends on the rate of corrosion, and will it be simultaneous or not?”

Assessing the environmental risk

The environmental threat from unexploded undersea munitions comes in two forms.

The first is discarded chemical weapons, including mustard agents, used to generate the kind of poison gas that caused terror in the trenches of the First World War. These agents, and breakdown products such as arsenic, are toxic to sea life and accumulate in the larvae of fish and shellfish.

The second comes from ingredients of conventional explosives, including TNT. These are known to cause cancer and so scientists cannot set a “safe” level of exposure.

“Both are persistent point sources of contamination at the bottom of the sea and they’re releasing toxic constituents,” says Beldowski, who has seen the situation firsthand in the Baltic Sea.

“We’ve got something like 40,000 tonnes of chemical munitions in the Baltic, and maybe half a million tonnes of conventional munitions,” he says. “It’s easier to identify chemical munition if it is corroded because you see the bursting charge, which was in the middle to spray the warfare agents around.”

There is no question that toxic chemicals are being released, but that does not always indicate a serious threat to the environment. It all depends on the concentration and how it affects marine life. That is something that Edmund Maser, a toxicologist at Kiel University in Germany, is trying to find out.

Maser has run experiments in the Baltic to expose mussels to corroding mines placed there by the British navy in the 1940s, and to chunks of TNT that have fallen out of them. After three months they found the mussels next to the chunks had absorbed up to 400 times more of the TNT and its derivatives than those placed next to the more intact mines.

Maser says this shows the risk of environmental contamination will rise sharply as munitions corrode.

“When we wait too long, all these bombs, mines and torpedo heads will lose their protecting metal shell. That will expose a bigger surface area of the explosive, and then we will have a higher dissolution rate into the environment.”

Fishing is banned from known munition sites in the Baltic. But work in Maser’s lab has shown that mussels grown elsewhere, including in the North Sea, have started to show signs of similar contamination. Mussels collected in the 1980s did not contain the toxins. “The first signs of munition chemicals appeared in 2000. And starting in 2012, we had clear signs of these chemicals appearing,” says Maser. The concentrations are still low, he stresses, but they will continue to increase.

Action is needed now, Maser says, before the situation gets worse. “We should now start remediation. To prevent further corrosion and to prevent a further contamination of the marine environment.”

Who should fix the problem?

Making the munitions safe or removing them from the sea is a challenging task. Disturbing sites risks accidents and further disintegration of metal casings. Controlled explosions have been carried out in the past, but these would simply spread the contamination over a wider area.

There’s also the question of who is responsible. David Alexander, professor of emergency planning and management at University College London, has studied the risks posed by the SS Richard Montgomery in the Thames. He points out that efforts to make the wreck safer have been complicated because it’s an American-owned ship in British waters.

“The US government offered to do something about it [in 1948 and 1967], and the British government said, ‘no thank you,’” he says.

The responsibility issue is particularly acute for Pacific islanders, including those on the Solomon Islands, who have effectively inherited someone else’s problem. Alongside international NGOs, the US and Japan have worked to remove munitions from places such as Palau, points out Linsey Cottrell, environment policy officer with the Conflict and Environment Observatory.

Much of this work has so far focused on munitions left on land, as they pose a greater threat to local people. But that work will have to spread offshore, Cottrell says.

“Palau and the Solomon Islands have got such a high dependency on tourism and diving. It’s kind of critical to deal with it,” she says.

Next year will see the 80th anniversary of the war that gave Iron Bottom Sound its name. The problems created then still remain to be solved.

David Adam is a freelance journalist based near London. This article appears courtesy of Dialogue Earth and may be found in its original form here

The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.


U.S. Air Force Sinks a Ro/Ro to Test Antiship Bomb

Ro/ro sinking
Monarch Countess going under (AFRL)

Published Aug 11, 2024 9:21 PM by The Maritime Executive


As part of its ongoing effort to perfect a new class of weapon - the precision-guided antiship bomb - the U.S. Air Force Research Laboratory has sunk another merchant vessel in the Gulf of Mexico. 

For years, a team at AFRL has been working with the U.S. Navy on an anti-ship guidance system that works with the Pentagon's standard smart bomb tail kit, the Joint Direct Attack Munition (JDAM) - among the most common and affordable guided weapons in the U.S. inventory. Their objective was to create a $40,000 bomb that rivals the performance of a $5 million Mk 48 heavyweight torpedo. 

Quicksink-equipped 2,000-pound bombs on an F-15E Strike Eagle, 2022 (USAF / AFRL)

“A Navy submarine has the ability to launch and destroy a ship with a single torpedo at any time, but the Quicksink aims to develop a low-cost method of achieving torpedo-like kills from the air at a much higher rate and over a much larger area,” explained AFRL program manager Kirk Herzog in 2022.

In the first round of testing in 2022, the lab attached this "Quicksink" guidance kit to a 2,000-pound bomb, loaded it onto an F-15E Strike Eagle, and dropped it on a decommissioned merchant ship. The vessel broke in half, and the stern section slipped below in 20 seconds, followed by the bow 17 seconds later.

A second test was carried out on the decommissioned amphib USS Tarawa last month off the coast of Hawaii, as part of a sinking exercise for the Rim of the Pacific (RIMPAC) maneuvers. Detailed results have not been released, but the target ultimately sank after multiple hits from different munitions. 

In July, AFRL tested Quicksink again - this time on a much different vessel, the small ro/ro Monarch Countess (IMO 7500736). A B-2 stealth bomber dropped the munition on the Countess off of Destin-Fort Walton Beach on Florida's Gulf Coast; no video of the test was released.

The Countess' sinking was carried out in partnership with Okaloosa County's artificial reef program, which redeploys older tonnage as an attraction for dive tourism and a habitat for fish. At a site depth of 180 feet, the wreckage will be accessible to recreational divers. 

Monarch Countess was a 2,700 dwt ro/ro freighter built in 1977. Her previous name was Cap Canaille, and she once flew the French flag for CMA CGM.