Thames Water has been hit with the largest ever penalty issued by the UK water regulator over failures in how it deals with wastewater and breaking the rules relating to the payment of dividends.
Ofwat has fined the UK's largest water company and its shareholder almost £123 million, made up of £104.5 million for breaches of wastewater rules and an additional £18.2 million for dividend breaches.
The watchdog's industry-wide investigation into how companies were managing treatment works and wider wastewater networks uncovered failings at Thames Water that amounted to what it called "a significant breach of the company's legal obligations, which has caused an unacceptable impact on the environment and customers".
Ofwat chief executive David Black 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."
The dividend investigation concluded that interim dividend payments totalling almost £169 million in October 2023 and March 2024 to the holding company, Thames Water Utilities Holdings Limited, broke the rules.
The company is now in cash lock-up, said Ofwat, and no further dividend payments can be paid by the company without first obtaining its approval.
"We are clear that dividends must be linked to performance for customers and the environment," said Black.
"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 the standard.
"We will protect customers from water companies that seek to take money out of their businesses, where their performance does not merit it."