The chief executive of South East Water, David Hinton, is facing intense pressure to retain his position following two major water supply crises that left thousands of households in Kent and Sussex without running water for days. The situation has escalated with a regulatory investigation and growing discontent from the company's own shareholders.
Regulatory Scrutiny and Shareholder Alarm
In a significant development, the water regulator Ofwat has opened a first-of-its-kind investigation into whether South East Water complied with its obligations to provide high standards of customer service. This move came just a day after the Environment Secretary, Emma Reynolds, called for a review of the company's operating licence.
Remarkably, even the firm's shareholders, who typically avoid public comment, have voiced their dismay. NatWest Group's pension fund, which owns a 25% stake, stated it was "extremely concerned" by the impact on customers and pledged to use its influence to direct the board to resolve the issues fully. This strong language signals a clear warning to the company's leadership.
A Precarious Financial Position
The shareholder frustration is compounded by recent financial injections. Investors pumped £200 million in fresh equity into the company in May, on top of a further £75 million in December 2024, to bolster its overstretched balance sheet. Despite this, the company's latest annual report hinted at ongoing financial strain, suggesting it needed a "more balanced regulatory settlement" to function effectively in the future.
In a separate financial blow, South East Water sought an 18% bill increase from the Competition & Markets Authority (CMA), appealing a decision by Ofwat. The CMA's provisional finding, however, allowed only a 4% rise, with a final decision still pending. This context makes the company's handling of recent operational failures even more critical.
Executive Pay Packages Under the Microscope
Against this backdrop of service failure and financial pressure, David Hinton's remuneration has drawn sharp criticism. It was revealed that the board awarded him a £400,000 "service award" or retention payment, contingent on him staying in his role for five years. This is on top of a 30% increase in his annual salary and the reintroduction of a long-term incentive scheme worth 150% of his salary.
Furthermore, Hinton received a one-off £50,000 "cash allowance" for work on the CMA appeal. When questioned by MPs this month about his reluctance to give media interviews during the crises, Hinton suggested he wanted to avoid "distracting questions" about his pay or shareholder dividends.
Separately, Ofwat is also conducting an engineering-focused investigation, launched in 2023, into whether the company failed to maintain an efficient water supply system. The outcome of this probe is expected within weeks, potentially adding to the company's mounting penalties.
With shareholders alarmed, regulators investigating, and customer trust eroded, the call for new leadership at South East Water is growing louder. Many observers believe a change at the top may be the only way to salvage the situation and protect the substantial investments made.
