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Ofwat has requested Thames Water to clarify how a £37.5m dividend it paid to a guardian firm doesn’t break guidelines designed to guard clients and the surroundings.
The water regulator stated it was investigating whether or not the dividend, which was introduced on Tuesday, was in step with the corporate’s licence necessities. It has not but opened a proper enforcement case.
Ofwat was informed prematurely concerning the dividend, and stated it had written to the water provider final Friday, asking for a reply by the tip of the month.
Thames Water stated the cash was merely being moved to a guardian firm as a way to assist pay its money owed, and that no dividends have been handed to “exterior shareholders”.
The letter’s existence was first reported by The Guardian.
The regulator stated: “Following notification that Thames Water has paid a dividend to shareholders, Ofwat is investigating whether or not this fee meets its licence necessities.
“Ofwat has requested Thames Water present extra data to exhibit how, particularly, the dividend fee meets the licence requirement to take account of service supply for patrons and the surroundings, in addition to funding wants and monetary resilience.
“We’ll evaluation any extra data the corporate offers and determine whether or not there’s a case for additional motion.”
New guidelines have been launched in Could this yr to make sure that water firms don’t pay dividends until they’ve delivered for patrons and the surroundings.
The regulator is ready to impose penalties of as much as 10 per cent of Thames Water’s related turnover.
The corporate stated it was working with Ofwat “to offer additional context and clarification” concerning the choice to pay the dividend.
“No distributions have been made to exterior shareholders of the group and so they haven’t taken an exterior dividend for six years (since 2017) to prioritise funding in bettering service for patrons and to guard the surroundings,” it stated.
“Our plans assume no exterior dividends to shareholders till at the very least 2030, to assist our turnaround.”
It comes as MPs stated they deliberate to deliver Thames Water into parliament to reply questions.
The Setting, Meals and Rural Affairs Committee stated it needed the corporate to return in subsequent Tuesday to clarify its funds. Ofwat has additionally been invited.
Earlier on Tuesday, Thames Water warned that its turnaround will “take time” and stated that its debt had continued to develop within the first half of the monetary yr.
The UK’s largest water provider reported a 54 per cent drop in pre-tax earnings to £246.4m within the six months to 30 September.
Revenues rose 12 per cent to £1.3bn however it spent a report £1bn on bettering its community.
The outcomes additionally revealed its debt pile swelled by 7 per cent to £14.7bn.
Interim bosses stated “fast and radical motion” is required to enhance its environmental and monetary efficiency.
They added: “Turning across the Thames will take time. We merely can not do every part that our clients and stakeholders want to see at a tempo and for a worth that everybody would really like.
“We’ll proceed to make the powerful decisions required to ship what issues most to our clients and the surroundings.”
The outcomes come simply days after it emerged that auditors of Thames Water’s guardian firm Kemble Water Holdings have warned it may run out of cash by subsequent April if shareholders don’t pump in more money.
PricewaterhouseCoopers (PwC) warned in accounts printed final week at Firms Home that there’s a “materials uncertainty” over the way forward for Kemble – the principle firm behind Thames Water – amid worries there aren’t any plans in place to refinance a £190m mortgage at considered one of its subsidiary firms.
Thames Water shareholders agreed in the summertime to inject £750m of latest funding to bolster the provider’s funds and stave off the specter of nationalisation.
Final yr the corporate had requested traders for £1bn.
A Thames Water Utilities spokesperson stated: “We’re in a strong monetary place and are extraordinarily lucky to have such supportive shareholders.”
The agency stated the funding bundle agreed in the summertime “is topic to satisfaction of sure circumstances, together with the preparation of a marketing strategy that underpins a extra targeted turnaround that delivers focused efficiency enhancements for patrons, the surroundings and different stakeholders over the following three years”.
Shareholders have additionally “acknowledged” the necessity for round one other £2.5bn in fairness funding wanted in future regulatory intervals, the group added.
The water provider’s former boss, Sarah Bentley, stepped down abruptly in June amid issues over the agency’s monetary safety.
It was revealed in June that the federal government was drawing up contingency plans for an emergency nationalisation ought to Thames Water collapse as issues grew that it will buckle underneath the load of its huge money owed.
The corporate – whose possession construction has been revealed to comprise an advanced net of companies behind the provider – has been saddled with money owed since privatisation and now faces larger curiosity on this debt as a few of it’s linked to the speed of inflation.
The group can also be set for a doable investigation into whether or not it misled MPs earlier this yr over the state of its funds and assist from traders.
