Ofwat given powers to stop failing water firms paying dividends
Water regulator Ofwat will be able to block companies from paying out dividends they cannot afford in a step towards forcing them to clean up waterways and leaks.
Water companies have been criticised for allowing millions of tonnes of human waste to be released into rivers and the sea while still making large payouts to their owners.
Since privatisation in 1989, the companies have paid more than £50bn to their shareholders, which include pension funds, private equity companies and offshore corporations.
David Black, chief executive officer of Ofwat, said: “When deciding on dividend payments to investors, water companies need to take stock of their performance for customers, the environment and the company's overall financial health. Too often, this has not been the case.”
It comes in the wake of demands from Environment Secretary Thérèse Coffey, who last month said she wants an assessment and action plan from every water and sewerage company in England, with suppliers told to prioritise fixing spills in bathing waters and nature sites.
The Government is seeking to change how water companies are punished for illegally polluting waterways, so they can be quickly fined up to £250m rather than waiting for lengthy criminal prosecutions to conclude.
Sir Chris Whitty, the Chief Medical Officer, has warned that bathers could become seriously ill by ingesting bacteria from human faeces.
An investigation by The Telegraph last year found that water companies were releasing raw sewage into rivers more than 1,000 times a day.
Government water minister Rebecca Pow said: “It is wrong for water companies to be responsible for environmental damage and poor performance but not face the penalties. It has been happening too often and it needs to stop.”
In 2022, Ofwat, which regulates water companies in England and Wales, told investors to put £1bn into Yorkshire Water, paying off some of its debt, following concerns over its financial health.
Northumbrian Water, controlled by Hong Kong investor Li Ka-shing, raised $1bn in a stake sale to US private equity firm KKR to shore up its finances also last year.