Regulator Ofwat has confirmed that the record penalties imposed on Thames Water will be borne by the company and its investors, not its customers.
An investigation found the firm breached rules with interim dividend payments of £37.5 million made in October 2023 to its parent company, Thames Water Utilities Holdings Limited, followed by a further £131.3 million in March 2024.
Thames Water is now in a “cash lock up”, meaning it cannot issue any further dividends without Ofwat’s approval.
Breakdown of the Fine Imposed on Thames Water
-
£104.5 million – For serious failures in wastewater operations. Ofwat cited poor maintenance and mismanagement of infrastructure, which led to widespread environmental damage.
-
£18.2 million – For breaching rules on dividend payments. This marks the first time Ofwat has fined a company for issuing dividends that were not justified by its service performance or environmental track record.
Ofwat Criticises Thames Water for Infrastructure Failures
Ofwat Chief Executive David Black said the regulator’s investigation uncovered a series of failures by Thames Water to adequately build, maintain, and operate its infrastructure. He also criticised the company for not offering an acceptable redress package to address environmental harm—necessitating what he described as a significant financial penalty.
Financial Implications
Thames Water, which serves around 25 million people in London and the Thames Valley, is grappling with nearly £20 billion in debt. As it seeks to shore up its financial position, US private equity giant KKR is reportedly in talks to invest £4 billion. However, expected regulatory penalties of more than £1 billion over the next five years present major hurdles.
Government Response
Environment Secretary Steve Reed said the fine is part of a wider government effort to clamp down on misconduct within the water industry. He noted that 81 criminal investigations into water companies are currently underway, stating the era of “profiting from failure” is coming to an end.
Ofwat has made clear that the £122.7 million penalty will be paid by Thames Water and its investors, with no cost to be passed on to customers.
