Thames Water slapped with historic £123m fine from Ofwat
Thames Water will receive a historic £123m fine from the water regulator over rule breaches tied to its wastewater operations and dividend payouts.
Ofwat confirmed a final decision on Tuesday following two of its “biggest and most complex” investigations into the beleaguered utility’s operations.
Thames Water and its shareholders will pay a £104.5m penalty for overseeing a “significant” breach of its legal obligations regarding wastewater, which has caused an “unacceptable impact on the environment and customers,” Ofwat said.
They will also have to cough up an additional £18.2m for breaching rules related to dividend payouts.
The fine will be paid solely by Thames Water and its investors, as opposed to billpayers, Ofwat added.
Chief executive David Black said the case for the two fines, which came despite protests from Thames Water executives, was “clear-cut.”
“Our investigation has uncovered a series of failures by the company to build, maintain and operate adequate infrastructure to meet its obligations.
He added: “The company also failed to come up with an acceptable redress package that would have benefited the environment, so we have imposed a significant financial penalty.”
A Thames Water spokesperson said: “We take our responsibility towards the environment very seriously and note that Ofwat acknowledges we have already made progress to address issues raised in the investigation relating to storm overflows.
“The dividends were declared following a consideration of the company’s legal and regulatory obligations.
The spokesperson added: “Our lenders continue to support our liquidity position and our equity raise process continues.”
Thames Water can ‘break from past’
Thames Water is in a race to survive amid a crisis over sewage leaks and a debt pile of more than £18bn.
The UK’s biggest water supplier looks set to fall into the hands of US private equity giant KKR, which is currently its “preferred bidder.”
Thames Water has faced fierce backlash for maintaining significant bonus and dividend payouts in spite of its financial issues and soaring sewage spills.
Chairman Sir Adrian Montague was forced to backtrack earlier this month after he told MPs that it was creditors who had insisted on carving bonuses out of a £3bn emergency loan earlier this year. In fact, it emerged executives at Thames Water had pushed for the payout.
The government last week announced a record 81 criminal investigation had been launched into water firms in the UK.
Environment Secretary, Steve Reed said on Tuesday it was the “toughest crackdown on water companies in history.
“The era of profiting from failure is over. The government is cleaning up our rivers, lakes and seas for good.”
Ofwat’s use of enforcement action surrounding dividend payments is another first for the watchdog.
“We are clear that dividends must be linked to performance for customers and the environment,” Black said.
He added the fine would give Thames Water certainty for “both its past failures and what we expect from the company to comply with its obligations in future.”
“The company is seeking new buyers to fund its turnaround to provide better services for customers and the environment by improving operational performance and financial resilience.
“This provides a clear opportunity to break with the past, Thames Water will now need to correct the issues our investigation has identified.”