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Thames Water, the UK’s largest water supplier serving 16 million customers across London and southern England, faces an unprecedented £122.7 million penalty from Ofwat, the water industry regulator, for failing to meet sewage management and dividend payment obligations.
The £104.5 million portion of the fine targets Thames Water’s breaches in wastewater operations, with Ofwat citing the company’s failure to build, maintain, and operate adequate infrastructure to prevent environmental harm.
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An additional £18.2 million penalty addresses Thames Water’s payment of “undeserved dividends,” marking the first time Ofwat has fined a water company for such breaches.
Ofwat highlighted dividend payments of £37.5 million in October 2023 and £131.3 million in March 2024 as violations of regulatory rules.
David Black, Ofwat’s chief executive, stated, “Our investigation has uncovered a series of failures by the company to build, maintain and operate adequate infrastructure to meet its obligations.”
Black further criticized Thames Water, saying, “We will not stand by when companies pay undeserved dividends to their shareholders.”
The company’s failure to propose an acceptable redress package for environmental damage prompted Ofwat to impose the substantial financial penalty.
Thames Water is currently in a “cash lock-up” period, prohibiting further dividend payments without Ofwat’s approval.
The utility giant, employing 8,000 people, faces mounting pressure due to a £20 billion debt pile, narrowly avoiding collapse with a £3 billion emergency loan secured in March.
Thames Water’s financial struggles intensified as it expected to run out of cash by mid-April before the rescue loan, with the government prepared to place the company into special administration.
The company raised consumer water bills by an average of 31% in April, adding to public frustration over rising costs and environmental failures.
Mike Keil, chief executive of the Consumer Council for Water, described the breaches as “a serious betrayal of customers and the environment,” noting Thames Water’s status as the least trusted water company in England and Wales.
Keil praised Ofwat’s action, stating, “We’re pleased to see Ofwat using its new powers to block unjustified dividends, which shareholders should have to earn through the company delivering on its commitments.”
Thames Water’s spokesman responded, “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 spokesman added, “The dividends were declared following a consideration of the company’s legal and regulatory obligations.”
Thames Water is undergoing financial restructuring and pursuing a sale to US investment firm KKR to stabilize its operations.
Environment Secretary Steve Reed declared, “The era of profiting from failure is over. The Government is cleaning up our rivers, lakes and seas for good.”
Ofwat faces pressure to hold water firms accountable amid a government review of industry regulation, with the wastewater fine first proposed last year and confirmed on Wednesday.
Senior Thames Water bosses warned the Environment Committee in May that excessive fines could jeopardize new investment opportunities.
The company’s lenders continue to support its liquidity position, and its equity raise process is ongoing, according to the Thames Water spokesman.
