Thames Water paid almost £2.5m to senior managers from an emergency loan that was meant to be used to keep the failing utilities company afloat – and has refused to claw back the payments, newly released documents reveal.The struggling water supplier paid bonuses totalling £2.46m to 21 managers on 30 April.The managers are due to receive the same amount again in December, and a further £10.

8m collectively next June, the chair of Thames Water, Sir Adrian Montague, said in a letter to the environment select committee.The company paused its management retention plan (MRP) in May after the Guardian revealed Montague wrongly told MPs that creditors had “insisted” on the payments.The environment secretary, Steve Reed, had been asked to claw back the payments.However, Montague said the board did not intend to recover the money, and suggested the two further tranches of bonuses could still be paid.In a letter to the committee’s chair, Alistair Carmichael, sent in June and published on Wednesday, Montague wrote: “The MRP was and remains paused.

The board has not taken further decisions on the MRP at this stage.”Montague added that there had been no attempt from Ofwat, the water regulator for England and Wales, or from the Department for Environment, Food and Rural Affairs (Defra) to recoup the funds that had already been paid.Thames is in a desperate race to raise funds and persuade the water regulator to let it off hundreds of millions of pounds of fines or risk being renationalised.Ministers had hoped to block bonuses paid from the loan under new legislation, but the rules limit the payouts that can be stopped to those at the very top of the company, such as the chief executive, the chief financial officer and the chair.The total planned payments are on average far more than double the salaries of the unnamed recipients, according to a table included in documents released by the committee.

For instance, four people with salaries of up to £400,000 are due to receive up to £1.13m each – nearly three years’ extra pay – as long as they stay at the business for the next year.Minutes from a Thames board meeting, which was convened to discuss the bonuses, suggested the retention payments were designed to avoid the new legislation, which bans performance-related bonuses for water bosses.They read: “The [remuneration] committee requested to reconfirm whether the MRP was consistent with the Water (Special Measures) Act and related Ofwat consultation and it was confirmed that the MRP was a retention payment rather than a bonus, and had no performance-related element.As such, it was not restricted by the Water (Special Measures) Act.

”However, payments to the company’s finance chief, Steve Buck, who was in line for a retention bonus to be paid in June, could be blocked, Reed indicated in a letter to the committee, also published on Wednesday.Reed said: “I expect Ofwat to assess whether Thames Water has breached the performance-related executive (chief executives and chief financial officers) pay prohibition rule with any of these payments and, if so, to take appropriate action.”The committee said it had recalled Montague and the chief executive of Thames Water, Chris Weston, for a hearing on 15 July.The bonuses came out of a controversial £3bn loan, which was meant to stabilise the company’s finances.The creditor loan, which was challenged in court by rival bondholders, has an interest rate of 9.

75%, plus fees.It was given by hedge funds, banks and other big investment firms that it already owes about £11.5bn, including Aberdeen, M&G, Elliott Management and Invesco.The same creditors are now the lead contenders to take over formal ownership of Thames in return for a further £5.3bn in equity investment and debt.

They were forced to step in to avoid Thames Water collapsing into temporary nationalisation after the US private equity firm KKR pulled out of a rescue deal.During a meeting with the environment committee in May, Montague told MPs that senior managers were in line for substantial retention bonuses because they were Thames’s “most precious resource”.Sign up to Business TodayGet set for the working day – we'll point you to all the business news and analysis you need every morningafter newsletter promotionHowever, the disclosure provoked fury as the company had said its finances were “hair raising” and that it had come “very close to running out of money entirely” last year.The best public interest journalism relies on first-hand accounts from people in the know.If you have something to share on this subject you can contact us confidentially using the following methods.

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SecureDrop, instant messengers, email, telephone and postSee our guide at theguardian.com/tips for alternative methods and the pros and cons of each.Ofwat was also not made aware of the bonuses until they had already been paid, its chief executive, David Black, told the environment committee in letters published on Wednesday.Black said he was “disappointed at the lack of transparency” shown by the company, and added: “At a time when remuneration in the water sector is under significant public scrutiny, we expect water companies to be proactive and transparent.”He suggested the bonus ban could be broadened beyond the current criteria, allowing payments to other members of the management team to be blocked.

Black said the ban was to be reviewed in 2027 but the date could be brought forward,Thames, which serves 16 million customers in London and south-east England, this week warned households it would announce a hosepipe ban unless the water shortage changed significantly,A Thames Water spokesperson said: “The MRP was established as part of the liquidity extension with the objective of retaining senior management during a complex recapitalisation that will see the company return to a stable financial and operational foundation …“Retention plans are commonplace in these types of deals for precisely this purpose and ours was based on extensive benchmarking of similar capital market events like M&A deals and restructurings,”A Defra spokesperson said: “Water company bosses, like anyone else, should only get bonuses if they’ve performed well, certainly not if they’ve failed to tackle water pollution,“As the independent regulator, we expect Ofwat to continue to examine any evidence of companies trying to circumvent the new rules and take appropriate enforcement action as necessary.

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