As the chief executive of the UK’s largest water and wastewater services company, Steve Robertson has his work cut out. But when Utility Week meets him at a bustling café on Tottenham Court Road in the capital, it doesn’t take long to realise he relishes it all.
That’s despite the difficulties he’s encountered in just over two years in the top job, including the company being hit with a record £20.3 million fine for polluting the River Thames with 1.4 billion litres of raw sewage.
The six pollution offences occurred before his appointment, between 2012 and 2014. It’s no secret in the industry that Thames Water has also been heavily criticised for poor leakage performance. In June, after an Ofwat investigation found that the Thames board did not have “sufficient oversight and control” of the company’s leakage performance, the regulator confirmed the water company would have to return a total of £120 million to customers for failing to tackle leakage adequately.
Any regrets, then, about taking on such a mammoth role? “Absolutely not,” Robertson fires back. “Of course there are challenges. If there weren’t challenges there wouldn’t be a job to be done. Leakage is an interesting and emotive topic; I don’t think we have done a really good job of explaining leakage.”
He admits the company loses 25 per cent of its output through leakage and that customers think the company should be aiming at “between 10 and 15 per cent”. Thames, he says, is working hard to reduce leakage, fixing between 4,000 and 5,000 leaks a month, and that if it did nothing at all, leakage “would probably go up 70 per cent a year”, adding: “You have to run really, really fast even to stand still, let alone reduce it significantly.”
The public perception of leakage doesn’t make dealing with it any easier, either. “People think leaks are those when water can be seen running down the street. There’s a feeling that 25 per cent of our production is running down the street and we are basically sitting back doing nothing.” But only 3 per cent of Thames’ water losses come from visible leaks, he reveals. “The water people see is not the problem, and therefore 97 per cent of the water that we have to save is hidden underneath the street, and you’ve got to find the leaks.”
This year also brought extra challenges. “In our part of the country it was the hottest, driest summer on record – ever. The soil dried out, and a massive amount of clay moved. We’ve probably got 40 per cent more work to do than we thought we had because of the impact of the freeze-thaw. We’re not going to sit and moan about it. We need to get on with it, but those extra leaks will all have to get fixed and paid for.”
There’s an economics to leakages, Robertson tells Utility Week over the clatter of cutlery being put away close by. “It’s a lot cheaper to produce more water than it is to fix leaks – a lot cheaper. People in the industry talk about an ‘economic level of leakage’, but I don’t think our customers are interested in that. It does have to get paid for, though; like everything, there is no freebie.”
Robertson doesn’t shy away from the possibility of further pollution prosecutions in the future. “We have made a 65 per cent reduction in the number of pollutions since 2013,” he says. “The cycle time for prosecutions is quite long, so the big fine was for pollution that took place five years ago. Since then a massive amount of work has been done. Because it is a long cycle time, I am sure there will be more prosecutions in the future about stuff that has happened years ago.
“Ultimately our ambition is to have no pollutions. We think that between 2020 and 2025 we will reduce by about 18 per cent, between now and 2025 by about 30 per cent, and by 40 per cent by 2027, but we would like to do it faster.”
Having set up BT’s Openreach infrastructure division and with experience of building “big global data networks”, Robertson is all too aware of the importance of technology in business. His own career has been a “mixture of high tech, big operations, and lots and lots of infrastructure”, and he has drawn lessons from that. “We need to get fantastic at using technology to pre-empt the impact of massive flows in terms of volume, and know where it will have a bad impact before it happens and do something about it,” he says.
Don’t get him started on wet wipes, though. “Why is it okay to put wet wipes down a toilet?” he fumes. “Why is it okay for manufacturers to put that they are flushable on the packaging? It is an absolute disgrace. It should not be allowed, and the behaviour of people who put fat, oil and grease in the sewers when they know it is going to endanger the effective operation of our sewerage treatment works is a disgrace as well.”
But he accepts that Thames has a role to play too. “We need to be better – I absolutely buy that. I am not in any way, shape or form side-stepping our responsibility. There are things that need to change.”
When first approached for the job at Thames Water, Robertson says he was perplexed. He recalls thinking: “Why is the largest water company in the UK talking to me, and why would I be interested in talking to them? But it didn’t take long for it to become clear that actually there was a really good fit. I was at a stage in my career where I wanted to do something which I felt was significant and important from a societal perspective, and Thames Water ticked all those boxes.”
His background leaves him well suited to deal with some of the challenges facing the water sector, such as climate change, economic growth, housing growth, population growth and rising expectations. “The choices that we make need to be well informed,” he says, “and we need to do that with our customers, not to them.”
He says Thames has even carried out some “cool research”, involving some “very well-informed discussions” with customers about the gearing of the company.
So what came out of those discussions? “They said we understand you need to borrow money to fund investment, we get that, but also we think it’s very important that you are financially resilient and therefore we would feel more comfortable if you reduce your gearing.”
He adds: “And when you look at what’s in our plan – we say, well, okay, we’re going to reduce gearing by about 5 per cent, and when you add the incremental investment to the reduction in debt you end up with an equity buffer, so the difference between the value of our assets and the debt of the company is something like £4.7 billion. That is a big bit of resilience. That’s £4.7 billion of financial resilience that we will build over the next seven years into the company.”
Robertson says that Thames didn’t build its business plan for Ofwat’s PR19 water price review with any regulatory outcome in mind, but “with the right outcome for the long-term health of our business, the way it serves its customers, and to clear up a space where we can begin to address some long-term issues”.
He’s adamant that he’s in the job for the long haul too. “One of the things with infrastructure businesses is that you have to be very suspicious of people who come in, wave a big flag, have a short-term impact, and disappear again. It’s not that sort of business. How can I expect my teammates in Thames Water to be committed, how can I expect us to make long-term decisions, how can I expect my customers to trust me if they think I’m here to make a bit of a splash and then disappear?”
Transformation and vision
Thames is engaging in transformation in a bid to be more transparent with customers. At the start of this year Ian Marchant, the former chief executive of SSE, joined as independent chairman and was given the job of leading a review of the Thames corporate structure and governance. Part of the review has seen the company start the process of closing down its Cayman Islands subsidiary.
Robertson says: “I was looking for somebody who had the same emotional commitment to the task in hand as well as the capabilities. And that’s where it starts. We need to care about the task our business has and the role it plays in the communities we serve. It goes beyond Ian; it goes to the rest of the board and our investors. They are committed to the long term. They are committed to investing in a business they can feel proud of, and have put their money where their mouth is. Not just in this asset management period, but in supporting our plan in the next AMP. That says we are going to make sure this is a business that invests, and invests wisely, but prioritises investment. There is a real unity of purpose inside our business. That is the foundation of our transformation.”
Robertson insists that understanding the relationship between the organisation’s customers, the environment and how the business is run is at the heart of this.
“The vision of our business is not a set of words,” he declares. “The vision of our business is absolutely what we are here to do. We are here for you in a changing world, and being here for you is about being here for you now and in the future, and for your children and for your children’s children.
“The second part of being here for you in a changing world is to recognise we have to change as well. Changing is about innovating, it’s about listening, it’s about doing things differently – because how can you cope with a changing world, how can I be here for you as my customer if I am not going to change in response to a changing environment and your changing expectations?”
These sentiments are not, he insists, just something to “look nice on a poster”. They are, he says, “at the heart of who we are as a business. It’s part of how we run our board meetings. It’s at the heart of how we make our decisions. It’s at the heart of how we want to engage with our customers and our stakeholders. And it’s what we believe in because it’s right.
“Nobody is forcing me to do this job. I am doing it because I absolutely want to do it. What I have found within Thames Water is that it is absolutely stuffed full of people who are passionate and care, and are here because they want to be doing what they are doing. If we keep that at the heart of what we are doing, everything is going to be fine.”