The UK’s greatest water firm has been fined £18.2m for “unjustified” dividends which the regulator stated broke shareholder fee guidelines.
Thames Water has been hit with the penalty by water regulator Ofwat over the mixed £195.8m in dividends paid in October 2023 and March 2024.
It is the primary time Ofwat has used such enforcement powers to make sure corporations hyperlink shareholder funds to their firm efficiency. The powers got here into impact in Might 2023.
In addition to the wonderful, £131.3m in dividends shall be clawed again by Ofwat because it stated Thames Water “failed to think about” the broader affect of the dividend issuance.
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The regulator stated Thames Water breached obligations below its licence situation.
For the reason that water firm’s credit standing dropped beneath funding grade in April it has been unable to make additional dividend funds with out Ofwat’s approval.
Water corporations to extend payments
The announcement is meant to function a warning to different water corporations, Ofwat stated.
Its chief govt David Black stated: “Ofwat’s £18m penalty and clawing again the worth of £131m in unjustified dividend funds is a transparent warning to the entire sector: We’ll take motion towards corporations who take cash out of those companies, the place efficiency doesn’t benefit it.”
Thames Water stated it took its licence obligations “very severely”, “together with these regarding the declaration and fee of dividends,” a spokesperson stated.
It stated it solely made the funds after contemplating “the corporate’s authorized and regulatory obligations”.
What is going on on at Thames Water?
Thursday’s penalty was the most recent in a collection of fines for the troubled utility. In August it was slapped with a £104m levy for sewage discharges. A yr earlier in July 2023 it was fined greater than £3m after admitting to polluting rivers.
Thames Water has discovered itself in a dangerous monetary place and this week won High Court approval to pursue a £3bn emergency mortgage.
If approval had not been granted Thames Water stated it might run out of money by 24 March and would doubtless be pushed right into a government-backed particular administration regime, a type of state possession.
The penalty comes on the identical day all English and Welsh water utilities had their enterprise plans for the subsequent 5 years agreed.
Average water bills will increase by 36%, equal to an additional £31 every year, and an funding of £104bn.
How a lot payments will improve depends on where you live and the settlement agreed for every native provider.
Ofwat stated it did “by no means” think about Thames Water’s monetary place when making its invoice rise and funding willpower.
