The UK’s largest water firm has been fined £18.2m for “unjustified” dividends which the regulator mentioned broke shareholder cost 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 companies hyperlink shareholder funds to their firm efficiency. The powers got here into impact in Might 2023.
In addition to the tremendous, £131.3m in dividends will likely be clawed again by Ofwat because it mentioned Thames Water “failed to think about” the broader influence of the dividend issuance.
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The regulator mentioned 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.
The announcement is meant to function a warning to different water corporations, Ofwat mentioned.
Its chief govt David Black mentioned: “Ofwat’s £18m penalty and clawing again the worth of £131m in unjustified dividend funds is a transparent warning to the entire sector: We are going to take motion in opposition to corporations who take cash out of those companies, the place efficiency doesn’t benefit it.”
Thames Water mentioned it took its licence obligations “very significantly”, “together with these referring to the declaration and cost of dividends,” a spokesperson mentioned.
It mentioned 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 newest in a collection of fines for the troubled utility. In August it was slapped with a £104m levy for sewage discharges. A 12 months 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 mentioned it will run out of money by 24 March and would possible 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 annually, 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 mentioned it did “by no means” think about Thames Water’s monetary place when making its invoice rise and funding willpower.
