UK water company Thames Water has been hit with a £122.7m (€146m) fine by Ofwat after two investigations. The penalty is the largest the water regulator has ever issued.
Ofwat said Thames Water and its shareholders will pay a £104.5m fine for breaches of rules relating to its wastewater operations, in addition to a £18.2m penalty for breaches of rules relating to dividend payments.
The troubled water company, whose investors include Canadian and UK pension funds as well as global sovereign wealth funds (SWFs), has also been ordered by Ofwat to rectify identified issues within its wastewater operations.
Ofwat’s decision to fine Thames Water and issue an enforcement order follows its investigation into wastewater companies’ operations. Ofwat had already proposed a £104.5m penalty and an enforcement order for Thames Water in August 2024.
The investigation considered several payments made by the company. Ofwat concluded that interim dividend payments totalling £37.5m made in October 2023 to its holding company Thames Water Utilities Holdings Limited and further dividend payments amounting to £131.3m made in March 2024 broke the rules.
Ofwat said Thames Water was now “in cash lock up” and no further dividend payments could be paid by the company without first obtaining approval from the regulator.
David Black, CEO at Ofwat, said: “This is a clear-cut case where Thames Water has let down its customers and failed to protect the environment. Our investigation has uncovered a series of failures by the company to build, maintain and operate adequate infrastructure to meet its obligations. The company also failed to come up with an acceptable redress package that would have benefited the environment, so we have imposed a significant financial penalty.
“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.”
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.”
Steve Reed, UK environment secretary, said: “The government has launched the toughest crackdown on water companies in history. Last week, we announced a record 81 criminal investigations have been launched into water companies. Today, Ofwat announce the largest fine ever handed to a water company in history.
“The era of profiting from failure is over. The government is cleaning up our rivers, lakes and seas for good.”
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