(Reuters) -British regulator Ofwat said on Thursday it plans to fine Thames Water 18 million pounds ($22.67 million) for breaking dividend payment rules, the first time the watchdog is taking action against water firms that do not link payouts to performance.
Debt-saddled Thames Water, which has 16 million customers, has become a poster child for Britain’s broken water sector following accusations investors have for decades plundered companies for dividends while neglecting infrastructure and the environment.
Ofwat had tightened rules on water companies’ dividend policy in May last year, telling firms to stop the payment of dividends if they are of poor financial health.
The regulator said Thames Water made interim dividend payouts totalling 37.5 million pounds to its holding company, Thames Water Utilities Holdings Limited, in October last year and further payouts of about 158.3 million pounds in March 2024.
The regulator, which oversees the privatised water and sewerage industry in England and Wales, said it would claw back value from 131.3 million pounds of dividend payments using price control so customers do not lose out on tax benefits.
“(This) 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,” Ofwat’s Chief Executive David Black said in a statement.
Thames Water, whose debt has a ‘junk’ rating, is now in cash lock up and no further dividends can be paid by the company without approval from Ofwat, the regulator said.
Ofwat, separately on Thursday, said it would allow bills to rise by an average of 36% over the next five years to fund a much higher level of investment than originally slated, with the aim of fixing the water sector.
($1 = 0.7939 pounds)
(Reporting by Yadarisa Shabong in Bengaluru; Editing by Abinaya Vijayaraghavan and Mrigank Dhaniwala)
