The former owner of crisis-hit Thames Water has been accused by union leaders of staging a “cost-cutting money grab” at another critical UK infrastructure asset under its control, as it emerged that Cadent Gas is considering cuts to its pension scheme.
Macquarie, the Australian banking powerhouse that owned Thames for a decade, has led a consortium controlling Cadent since 2016. Cadent, Britain’s biggest gas network, serving 11 million people, was formerly part of National Grid.
It is understood that Macquarie bosses are considering closing Cadent’s defined benefit pension scheme, provoking anger among trade unions, which are consulting about taking strike action over the issue.
The scheme, which closed to new members in 2002, has 430 active employees with at least 20 years’ service as well as several thousand retired members.
It is understood that Cadent is considering closing the scheme because it believes the level of investment required could be better spent on new technology and training its workforce.
The GMB union, which represents workers at the company, said the defined benefit scheme was “fully funded and in surplus” and estimated that it cost Cadent about £10m a year to service.
Gary Carter, a national officer at GMB, said: “This is a cost-cutting money grab by Macquarie to increase profits and dividends to shareholders.
“The pension scheme is not in trouble; it’s fully funded and in surplus. Cadent Gas makes hundreds of millions of pounds’ profit and pays large dividends.
“These are long-serving and skilled employees who have given many years of service in the gas sector, serving communities and customers.
“Cadent was well aware when it purchased the business that the pension scheme was there and it has a moral and financial obligation to it.”
Last month, Cadent said that an increase in revenues had helped it record a £945m profit in the 2022-23 financial year, up from £685m the year before. It paid a £350m dividend to shareholders and had net debts of £7.4bn.
It said the defined benefit pension scheme had a £729m surplus in 2023, down from just over £1bn in 2022.
Cadent also told the union it paid disproportionately more into the defined benefit scheme compared with the defined contribution scheme, which has just over 6,000 members.
Last week fears over the financial health of Thames Water emerged hours after the shock resignation of its chief executive, Sarah Bentley.
Macquarie, which now owns Southern Water, has been criticised for its ownership of Thames Water. It is estimated that Macquarie left Thames with an extra £2.2bn in loans. Over 11 years, £2.8bn was paid out in dividends, while Thames’s debt rose sharply from £3.2bn to £10.5bn.
The chairman of Cadent, Sir Adrian Montague, has been parachuted in to replace Ian Marchant, who held the same role at Thames.
It emerged over the weekend that one of Thames’s largest shareholders, the Universities Superannuation Scheme (USS), is backing the company to turn around its financial position.
“We have given our backing to Thames Water’s turnaround plan and net zero roadmap and engage with them regularly to support their long-term strategy,” Bill Galvin, the chief executive of USS, said on Friday in a note to the pension fund’s sponsoring employers.
The biggest shareholder is the Ontario Municipal Employees’ Retirement System, which has a 32% stake. USS is the second largest, controlling about 20%. Another 10% is owned by a subsidiary of the Abu Dhabi sovereign wealth fund, and almost 9% is held by China’s sovereign wealth fund.
Thames took on much of its debt when it was under the ownership of Macquarie. It has missed targets for improving operational and environmental performance and is under pressure to fix leaks from its pipes, which are at a five-year high, and to stem the flow of raw sewage into rivers, for which it has been repeatedly fined.
In May, ministers were urged by GMB to intervene if Macquarie pushed the button on a mooted £3bn deal to take full control of National Grid’s former gas transmission and meter business.
Macquarie and Cadent declined to comment.
