- The company and its shareholders will pay a £104.5m penalty for breaches of rules relating to its wastewater operations. This is the largest penalty Ofwat has ever issued.
- They will also pay an additional penalty of £18.2m for breaches of rules relating to dividend payments.
- An enforcement order has been issued by Ofwat requiring Thames Water to rectify identified breaches relating to its wastewater operations.
Ofwat has announced the final decision in two investigations looking into the operations of Thames Water, who will face penalties totalling £122.7m. These will be paid by the company and its investors, and not by customers. In its biggest and most complex investigation, Ofwat has been looking into all wastewater companies’ operation, management and maintenance of their sewage treatment works and sewerage networks. As part of that investigation, in August 2024, Ofwat consulted on a proposal to impose a £104.5m penalty on Thames Water, alongside an enforcement order which would require the company to take steps to ensure its compliance. Today, Ofwat has finalised both the penalty and enforcement order which have been imposed on the company. Ofwat’s investigation into how the company was managing its treatment works and wider wastewater network uncovered failings that have amounted to a significant breach of the company’s legal obligations, which has caused an unacceptable impact on the environment and customers. David Black, Chief Executive at Ofwat, said: “This is a clear-cut case where Thames Water has let down its customers and failed to protect the environment. Our investigation has uncovered a series of failures by the company to build, maintain and operate adequate infrastructure to meet its obligations. 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. “This decision provides certainty for the company 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.” Environment Secretary, Steve Reed said: “The Government has launched the toughest crackdown on water companies in history.
“Last week we announced a record 81 criminal investigations have been launched into water companies. Today Ofwat announce the largest fine ever handed to a water company in history.
“The era of profiting from failure is over. The Government is cleaning up our rivers, lakes and seas for good.” Ofwat has also confirmed its decision to impose a £18.2m penalty on Thames Water as a result of a separate investigation which found that the company had broken the rules relating to the payment of dividends. This is the first time Ofwat has used its powers to take enforcement action against a water company where their decision to make dividend payments does not properly reflect the company’s delivery performance for customers and the environment. Mr Black said: “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. 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.” This investigation considered several payments made by the company. 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. Whilst no cash left Thames Water as a result of the March 2024 payment, there was an extraction of value which Ofwat will be able to recover. In addition to the penalty, through an adjustment to future price control, ensuring customers do not lose out. 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.
