Thames Water hit with fine of almost £123m by UK regulator

(Sharecast News) - Troubled UK utility Thames Water has been slapped with a record fine of almost £123m by industry regulator Ofwat over environmental breaches and dividend payments. The watchdog ordered Thames Water to pay £104.5m for breaking rules on wastewater operations - the largest penalty Ofwat has ever issued.

In addition, the company will pay an extra penalty of £18.2m over breaches relating to dividend payments. It is the first time Ofwat has taken action against a company that has paid dividends which did not "properly reflect the company's delivery performance for customers and the environment".

Both fines would be "paid by the company and its investors, and not by customers", Ofwat said in a statement.

"This is a clear-cut case where Thames Water has let down its customers and failed to protect the environment," said Ofwat boss David Black.

Thames, the UK's largest water company, has been struggling with a £19bn debt pile and secured a £3bn loan in February to stop it collapsing. The firm is scrambling to raise money from investors and desperate to avoid being renationalised.

"We are clear that dividends must be linked to performance for customers and the environment. We will not stand by when companies pay undeserved dividends to their shareholders," Black added.

"This is the first time we have used these new powers, and this sets the standard. We will protect customers from water companies that seek to take money out of their businesses, where their performance does not merit it."

Ofwat concluded that, interim dividend payments totalling £37.5m, made in October 2023 to its holding company, Thames Water Utilities Holdings Limited, and further dividend payments amounting to £131.3m, made in March 2024 broke the rules.

The company is now in cash lock up and no further dividend payments can be paid by the company without first obtaining approval from Ofwat, the regulator said.

Reporting by Frank Prenesti for Sharecast.com