Thames Water fined £122.7m by Ofwat

Ofwat handed out its biggest ever fine of £122.7m to Thames Water following two investigations into the conduct of the business.

The company and its shareholders will pay a £104.5m penalty for breaches made by its wastewater operations, with Ofwat’s investigation uncovering wastewater network failings that amount to a "significant breach" of its legal obligations, leading to an "unacceptable impact" on the environment and customers.

Its chief executive, David Black, said: "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."

Alongside this, Ofwat will impose an £18.2m penalty following a separate investigation which found the company had broken rules relating to the payment of dividends.

This is the first time the regulator imposed such a fine, with the decision being made because the dividend payments made did not "properly reflect the company’s delivery performance" for customers and the environment.

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."

Responding to the news, 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."

The business has also said it will review the enforcement order and penalties when considering its next steps.