Water company hit with record nine-figure fine

Thames Water, the UK's biggest water provider, has been hit by a record fine by regulator Ofwat.

The company has been fined £122.7m following Ofwat's "biggest and most complex" investigation. It follows two investigations related to Thames Water's wastewater operations and dividend payouts.

Of the total fine, £104.5m - 9% of Thames Water's turnover - has been levied for breaches of wastewater rules - just below the maximum 10% of turnover that Ofwat could have applied. Money blog: Inside the booming one-bed flat market Another £18.2m penalty will be paid for breaches of dividend payment rules.

It is the first time Ofwat has fined a company for shareholders' payments which do not "properly reflect" its performance for customers and the environment. The fine will be paid by Thames Water and its shareholders, Ofwat said, rather than customers.

'Unacceptable' environmental impact The regulator was highly critical of Thames Water's handling of wastewater, describing it as having an "unacceptable" impact on the environment. Its investigation of treatment works and the wider wastewater network uncovered failings which "amounted to a significant breach of the company's legal obligations" and caused that unacceptable environmental impact.

The company announced a 40% spike in sewage spills in December for the period from January to September 2024. The fine was so large because Ofwat's chief executive, David Black, said Thames Water "failed to come up with an acceptable redress package that would have benefited the environment".

"This is a clear-cut case where Thames Water has let down its customers and failed to protect the environment," Mr Black said. "Our investigation has uncovered a series of failures by the company to build, maintain and operate adequate infrastructure to meet its obligations." As a result, Thames Water is required to agree to a remediation plan with Ofwat within six months.

Another investigation by the Environment Agency into environmental permits at sewage treatment works is ongoing. Bad news for Thames Water finances Thames Water serves 16 million customers across London and the South East and has just about fended off effective nationalisation, having secured an emergency £3bn loan.

Its debts now top £19bn. Ofwat's fines were not factored into Thames Water's financial planning for the next five years.

The company's chief executive, Chris Weston, told a recent sitting of the Environment, Food and Rural Affairs select committee that Thames Water's future was dependent on Ofwat being lenient with fines. 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." Environment Secretary, Steve Reed said the government has launched the "toughest crackdown on water companies in history"."The era of profiting from failure is over.

The government is cleaning up our rivers, lakes and seas for good.".