Utility Week

UTILITY Week 16th September 2016

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24 | 16TH - 22ND SEPTEMBER 2016 | UTILITY WEEK Operations & Assets Analysis I t has been a whirlwind of change for the water sector. Along with the deals, merg- ers, rebrands and market exits, the indus- try has also said goodbye to many senior figures. Long-standing water boss Martin Baggs started the ball rolling when he announced on 30 November last year that he will step down as Thames Water's chief executive in late 2016. Thames then lost a further three senior leaders as Graham Southall, managing direc- tor of Thames Water Commercial Services, and Rupert Kruger, head of business retail announced their intentions to leave the com- pany, and chief financial officer Stuart Sid- dall said he would retire at the end of 2016. Then, on 10 June, Luis Garcia said he will step down as Bristol Water's chief executive, aer seven years at the helm. He will remain in post until a new chief executive is found, at which point he will return to Suez Group in a senior role. Just two months later on 24 August, Southern Water chief executive Matthew Wright decided that, aer more than six years, he will exit the company. He's hot on the heels of the firm's chief financial officer Michael Carmedy, who quit in March – replaced by William Lambe. This mass exit from senior water roles, along with Ofwat's overhaul of its senior team, seems like more than coincidence. So why is it all happening now? It could have something to do with the imminent opening of the non-household retail market. Perhaps it is a case of getting out before things really shake up. However, in the case of the three chief executives, it most likely has more to do with allowing their successors to bed in and get to grips with the current price control require- ments before negotiations really get going for PR19. As Baggs said, when he announced he was leaving: "Taking this decision now means that my successor can be in post in time to oversee the crucial task of preparing the company's business plan for the next regulatory period." Meanwhile, in their leaving statements, Garcia and Wright did not give reasons for their departures. Big things have happened for all three companies recently. Bristol Water lost its appeal to the Competition and Markets Authority in October 2015, which forced the company to lower its bills by 16 per cent for 2015-20, and Southern did what most expected and confirmed its exit from the non-household retail market in June this year, selling its business customer base to the ambitious Scottish retailer Business headhunters are sure to be scouring the mar- ket, and other markets, over the next few months. Thames Water has already found a replacement for Martin Baggs in the form of Steve Robertson, pinched from the telecoms sector. Robertson assumed full control of Thames at the beginning of this month, meaning the firm can now begin its hunt for a new chief financial officer. And the search for new leaders for South- ern and for Bristol Water is "ongoing". Bristol Water says the board is manag- ing an independent recruitment process and pursuing "all avenues" to find its next chief executive. Southern Water, which made its announcement much more recently, will not say much on the issue, but insists that: "The timing of the announcement ensures that the search for a successor can begin and that continuity of leadership can be provided through the next price review and invest- ment cycle, which starts in earnest next year." Despite their exits from the non-house- hold retail market, Thames and Southern must still be completely astute when it comes to dealing with their household customers. For this reason, Southern could decide to fol- low Thames, and other big water companies, and recruit someone from telecoms. Another option would be to recruit some- one internally. However, many Southern top bosses have recently le, including the afore- mentioned chief financial officer, so there is unlikely to be enough experience in the com- pany to take the role of chief executive. Bristol Water, too, could look to other sec- tors if recruiting externally. And if recruiting internally, it has a choice of five directors: Mick Axtell, finance director (the most likely contender); Gary Freake, network direc- tor; Ben Newby, customer services director; Alan Marvin, production director; or Tom Kiedrowski, interim director of strategy and regulation. A lot has happened over the past 12 months. The water sector is evolving fast, and is sure to see many more changes in the coming months and years. Exodus of water executives The past few months have seen the departure of many a senior person in the water sector. So why are all these bosses quitting now? And what are we likely to see happen next? By Lois Vallely. "Taking this decision now means that my successor can be in post in time to oversee the crucial task of preparing the company's business plan for the next regulatory period." Martin Baggs, chief executive, Thames Water Stream. Thames followed closely, announc- ing its own exit in July. It is not unusual to see changes around the time negotiations begin for a new price control period. Another thing the sector is likely to see is a changeover in the inves- tor world. Current investors are likely to get out and new investors come in during this moment of maximum stability, when they can be sure of companies' targets for the next few years. Capstone Infrastructure – which owned a 50 per cent stake in Bristol Water – was itself recently sold to fellow investment firm Icon Infrastructure. And the sector is likely to see further investor shis in the coming months as the companies begin to negotiate their terms for PR19. When it comes to replacements, a lot of

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