Thames Water, the UK’s biggest water provider, has been hit by a record fine by regulator Ofwat.
The company has been fined £122.7m following Ofwat’s “biggest and most complex” investigation.
It follows two investigations related to its wastewater operations and dividend payouts.
Of the total fine, £104.5m – 9% of Thames Water’s turnover – has been levied for breaches of wastewater rules. It’s just below the maximum 10% of turnover Ofwat could have applied.
Money blog: Inside the booming one-bed flat market – what you get for £20k a month
Another £18.2m penalty will be paid for breaches of dividend payment rules.
It’s the first time Ofwat has fined a firm for deciding to make shareholders’ payments which do not “properly reflect” its performance for customers and the environment.
The fine will be paid by the company and its shareholders, Ofwat said, rather than customers.
Please use Chrome browser for a more accessible video player
Thames Water boss can ‘save’ company
Bad news for Thames Water finances
It’s bad news for Thames Water, which serves 16 million customers across London and the South East, and has just about fended off effective nationalisation, having secured an emergency £3bn loan. Its debts now top £19bn.
These fines were not factored into Thames Water’s financial planning for the next five years. The company’s chief executive, Chris Weston, told a recent sitting of the Environment, Food and Rural Affairs select committee that Thames Water’s future was dependent on Ofwat being lenient with fines.
Listen to The World with Richard Engel and Yalda Hakim every Wednesday
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. Our lenders continue to support our liquidity position and our equity raise process continues.”