The UK’s biggest water company has been fined £18.2m for “unjustified” dividends which the regulator said broke shareholder payment rules.
Thames Water has been hit with the penalty by water regulator Ofwat over the combined £195.8m in dividends paid to shareholders in October 2023 and March 2024.
It’s the first time Ofwat has used such enforcement powers to ensure firms link shareholder payments to their company performance. The powers came into effect in May 2023.
As well as the fine, £131.3m in dividends will be clawed back by Ofwat as it said Thames Water “failed to consider” the wider impact of the dividend issuance.
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The regulator said Thames Water breached obligations under its licence condition.
Since the water company’s credit rating dropped below investment grade in April it has been unable to make further dividend payments without Ofwat’s approval.
The announcement is intended to serve as a warning to other water companies, Ofwat said.
Its chief executive David Black said: “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 said it took its licence obligations “very seriously”, “including those relating to the declaration and payment of dividends,” a spokesperson said.
It said it only made the payments after considering “the company’s legal and regulatory obligations”.
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