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 to shareholders 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 Could 2023.
In addition to the effective, £131.3m in dividends will probably be clawed again by Ofwat because it stated Thames Water “failed to consider” the broader affect of the dividend issuance.
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The regulator stated Thames Water breached obligations below its licence situation.
Because the 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.
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Water firms to extend payments
The announcement is meant to function a warning to different water firms, Ofwat stated.
Its chief government David Black stated: “Ofwat’s £18m penalty and clawing back the value of £131m in unjustified dividend payments is a clear warning to the whole sector: We will take action against companies who take money out of these businesses, where performance does not merit it.”
Thames Water stated it took its licence obligations “very seriously”, “including those relating to the declaration and payment of dividends,” a spokesperson stated.
It stated it solely made the funds after contemplating “the company’s legal and regulatory obligations”.
What is going on on at Thames Water?
Thursday’s penalty was the most recent in a sequence 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 deadly monetary place and this week received Excessive Court docket 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 seemingly 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 following 5 years agreed.
Common water payments will enhance by 36%, equal to an additional £31 every year, and an funding of £104bn.
How a lot payments will enhance will depend on the place you reside and the settlement agreed for every native provider.
Ofwat stated it did “not at all” take into account Thames Water’s monetary place when making its invoice rise and funding dedication.
