The UK’s largest water company has been fined £18.2m for “unjustified” dividends which the regulator said broke shareholder payment rules.
Thames water has been hit with a penalty by water regulator Ofwat over £195.8 million in dividends paid in October 2023 and March 2024.
This is the first time Ofwat has used such enforcement powers to ensure companies link shareholder payments to their performance. The powers came into effect in May 2023.
As well as the fine, £131.3 million in dividends will be clawed back by Ofwat, as it said Thames Water “failed to take into account” the wider impact of issuing dividends.
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The regulator said Thames Water had failed to fulfill its obligations under the conditions of its license.
Since the water company’s credit rating fell below investment grade in April, it has been unable to pay new dividends without Ofwat approval.
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The announcement is intended to serve as a warning to other water companies, Ofwat said.
Its chief executive, David Black, said: “The £18 million penalty imposed by Ofwat and recovery of the value of £131 million in unjustified dividend payments is a clear warning to the entire sector: We will take action against companies that make money from these activities, where performance has no impact. doesn’t deserve it.
Thames Water said it takes its licensing obligations “very seriously”, “including those relating to the declaration and payment of dividends”, a spokesperson said.
It said it only made the payments after taking into account “the company’s legal and regulatory obligations”.
What is happening at Thames Water?
Thursday’s sanction was the latest in a series of fines imposed on the troubled utility. In August he was slapped with a £104m tax for sewage discharges. A year earlier, in July 2023, he was fined more than £3 million after admit the pollution of rivers.
Thames Water finds itself in a perilous financial situation and this week obtained High Court approval to apply for a £3 billion emergency loan.
If approval had not been granted, Thames Water said it would run out of cash by March 24 and would likely be subject to a government-backed special administration regime, a form of state property.
The sanction comes on the same day that all English and Welsh water utilities approved their business plans for the next five years.
Average water bills will increase by 36%, which equates to an extra £31 each year and an investment of £104 billion.
How much will bills increase? it depends on where you live and the agreed payment for each local supplier.
Ofwat said it had “not at all” taken Thames Water’s financial situation into account when increasing its bill and determining investments.