Thames Water fined for 'unjustified' dividend payments to shareholders

Thames water has been fined by Ofwat. Credit: PA

Thames Water has been fined £18.2 million by regulator, Ofwat, over 'unjustified' dividend payments to shareholders.

Ofwat said the fine was for paying £158.3 million in dividends to shareholders in October 2023 and March 2024, which Ofwat says breached condition P30 of its licence.

The regulator said it will claw back £131.3 million of the payments so it does not come out of customer bills.

In documents released by Ofwat, Thames Water claimed the payments were necessary to ensure it had ongoing access to debt markets.

Ofwat disagreed with this assessment, saying the payments resulted in 'the extraction of value' from Thames Water.

Thames Water also told Ofwat the payments were 'in the best interests of its customers and the environment', which Ofwat said it was 'not convinced by'.

The regulator also said it considers the contravention of Thames Water's obligation to be 'serious' and said the payments were not trivial.

It is the first time the regulator has taken enforcement action against Thames Water over its dividends payments.

A Thames Water spokesperson said: "We take our licence obligations very seriously, including those relating to the declaration and payment of dividends.

"The dividends were declared following a consideration of the Company’s legal and regulatory obligations and its dividend policy has been updated to reflect the requirements of Licence Condition P30.

"Consequently, we disagree with Ofwat’s decision and we will be providing a comprehensive response to their consultation in due course.

“No distributions have been made to external shareholders of the group and they have not taken an external dividend since 2017 to prioritise investment in improving service for customers and to protect the environment.

"Our plans assume no external dividends to shareholders until at least 2030, to support our turnaround.”

Want a quick and expert briefing on the biggest news stories? Listen to our latest podcasts to find out What You Need To Know...