Thames River waters fined a record £123 million after investigations found failed and illegal dividends
Thames water was fined £122.7 million after two annoying investigations into the UK’s largest hydropower tools.
Regulators found that the company violated key obligations related to its wastewater operations and issued dividends illegally despite poor environment and customer performance.
Ofwat confirmed this morning that the £104.5 million fine was linked to the company’s serious failure in wastewater infrastructure, the largest economic fine ever for regulators. Another £18.2 million was imposed for violations related to dividend payments, the first time Watt has fined a dividend decision that failed to reflect its performance.
The regulator aims to have a temporary dividend, totaling £37.5 million, issued in October 2023 and paid an additional £131.3 million in March 2024. Thames Water is now prohibited from issuing further dividends without the express approval of Ofwat due to the enforcement lawsuit.
“Our investigation has found a series of failures in the company to build, maintain and operate sufficient infrastructure to meet its obligations. The company has not yet proposed acceptable remedies, which will benefit the environment, and therefore we imposed significant fines.”
This move comes from increasing public pressure on the environmental performance of water companies and political pressure, especially in terms of pollution and sewage overflow. 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 into water companies. Today, Ofwat announced the largest fine ever.
The fine will be borne by the company and its shareholders rather than by the client.
The Thames water provides 10 million people drinking water to London and the Thames Valley and provides 15 million wastewater services for more than a year. Its current shareholders, including Omers, Canadian Pension Fund and sovereign wealth interests from China and Abu Dhabi, announced last year that they were “not investable” and announced their holdings.
To stabilize the company’s last effort, the Thames River board chose KKR, a global investment company, as its preferred bidder. KKR has provided a £4 billion cash injection in exchange for control, but the deal depends on complex negotiations with Ofwat on fines and future performance goals. The total debt of Thames water is about £20 billion and creditors are expected to accept large amounts of writing under the current rescue plan.
Thames owner Sir Adrian Montague and CEO Chris Weston said the company’s future now depends on the outcome of talks with KKR and regulators. They warn that if no agreement is reached, the penalties for ongoing failure – which could total over £1 billion in five years) are completely risking expelling investors.
OFWAT’s current goals include improving pollution incidents, power leakage and customer service, all areas where Thames water has been underperforming. Experts warn that failure to renegotiate these goals could prevent the Thames from attracting new funds or improving credit ratings from the junk state.
If the investment stalls and companies still cannot refinance, they may be forced to directly intervene in the ministers and regulators, putting the Thames water in special management – effectively returning the utilities to public control.
