Thames Water has been handed a record-breaking £122.7 million fine by water regulator Ofwat after it “let down its customers and failed to protect the environment”.
The company was hit with the largest fine ever issued by the regulator following what Ofwat described as two of its “biggest and most complex” investigations to-date.
The record-breaking fine, handed down following two separate probes spanning several years, has led Environment Secretary Steve Reid to insist that “the era of profiting from failure is over”.
On Wednesday, the water company and shareholders were ordered to pay £104.5million penalty for breaches of rules relating to its wastewater operations.
The firm will also have to pay an additional penalty of £18.2m for breaches of rules relating to dividend payments.
Ofwat highlighted that Thames Water and its investors will now be the ones to foot the bill – and not customers.
It comes just a week after plans to pay large bonuses to senior bosses at Thames Water were “withdrawn”.
The tabled bonuses were linked to the water company securing a £3 billion emergency bail-out loan, Environment Secretary Steve Reed said at the time.
Hours before the bonus announcement, Thames Water’s chairman admitted to incorrectly stating that the so-called retention plan was “insisted upon” by the company’s lenders.
Described as “its biggest and most complex investigation” yet, Ofwat today confirmed its investigation involved “looking into all wastewater companies’ operation, management and maintenance of their sewage treatment works and sewerage networks”.
In August 2024, as part of that investigation, Ofwat said it consulted on a proposal to impose a £104.5m penalty on Thames Water, alongside an enforcement order, which also requires the firm to comply with the regulator’s orders.
The fine follows a string of failures linked to the company – notably where water treatment and the discharge of raw sewage are concerned.
A second investigation focussed on several dividend payments made by the company to its shareholders.
Ofwat concluded that dividend payments totalling £37.5m, made in October 2023 to its holding company, Thames Water Utilities Holdings Limited, broke the regulator’s rules.
Ofwat added further dividend payments amounting to £131.3m, made in March 2024, also contravened regulations.
“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,” Ofwat concluded.
“In addition to the penalty, through an adjustment to future price control, ensuring customers do not lose out. The company is now in cash lock up and no further dividend payments can be paid by the company without first obtaining approval from Ofwat.”
“Today, Ofwat has finalised both the penalty and enforcement order which have been imposed on the company,” it confirmed.
Described as a “clear-cut case” by Ofwat’s Chief Executive, David Black, he added that 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.”
Environment Secretary Steve Reid 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,” Mr Reid insisted.
“The Government is cleaning up our rivers, lakes and seas for good.”
