Thames Water slapped with record £122m fine after investigation finds 'customers let down by failure'

Financial penalties levied on the water company will be paid by the firm and its investors, and not by customers. As part of its "biggest" investigation, Ofwat examined into all wastewater companies’ operation, management and maintenance of their sewage treatment works and sewerage networks.

In August 2024, the regulator consulted on a proposal to impose a £104.5million penalty on Thames Water, alongside an enforcement order which would require the company to take steps to ensure its compliance.

As of today, the regulatory body has finalised both the penalty and enforcement order which have been imposed on the company.

David Black, the chief Executive 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.

"[Thames Water] 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."

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Labour's Environment Secretary Steve Reed added: "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."

Furthermore, the regulator confirmed its decision to impose a £18.2million penalty on Thames Water as a result of a separate investigation which found that the company had broken the rules relating to the payment of dividends.

This is the first time Oft has used its powers to take enforcement action against a water firm where their decision to make dividend payments does not properly reflect the company’s delivery performance for customers.

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On this financial penalty, Black added: "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 thestandard. We will protect customers from water companies that seek to take money out of their businesses, where their performance does not merit it."

The regulator found interim dividend payments totalling £37.5million, made in October 2023 to its holding company, Thames Water Utilities Holdings Limited, and further dividend payments amounting to £131.3million, made in March 2024 broke the rules.

Whilst no cash left Thames Water as a result of the March 2024 payment, there was an extraction of value which Ofwat will be able to recover. In addition to the penalty, through an adjustment to future price control, ensuring customers do not lose out.

As a result, the firm is now in cash lock up and no further dividend payments can be paid by the company without first obtaining approval from the regulator..