Ofwat hits ailing Thames Water with £40m fine over dividend payment
Britain’s biggest water company has been told it faces a fine of more than £40m over the payment of a shareholder dividend in spite of its poor performance.
Sky News has learnt that Ofwat notified Thames Water last month that it was minded to impose the penalty for breaching rules on the payment of dividends.
The development will pile further pressure on Thames Water as it limps towards a potential temporary nationalisation under a debt mountain of more than £15bn.
The fine being considered by Ofwat is notable because it is larger than the £37.5m payout made to shareholders last autumn, according to a Thames Water insider.
The company has the right to appeal over the proposed fine before a final decision is made, and the timing of the general election on 4 July means that a final ruling is now unlikely until after that date.
Ofwat has already postponed its draft determinations on the five-year spending and investment plans of Britain’s privately owned water companies until after the election.
It had been due to issue its initial decisions on 12 June.
Its final determinations, which are expected in December, will shape investors’ decisions about whether they can commit capital to fund the companies over the following half-decade.
Thames Water has been plunged into the biggest crisis in its history by its shareholders’ judgement that the company has become “uninvestible” as a consequence of the regulatory framework set by Ofwat.
The company, which serves more than 15 million customers across London and south-east England, counts sovereign wealth funds and pension funds from Australia, Canada, China and Britain among its shareholders.
This week, the Financial Times reported that Ofwat was considering the introduction of a “recovery regime” for financially troubled water companies to enable them to survive.
This would entail reducing future financial penalties for water leaks and pollution – both of which have stained Thames Water’s reputation in recent years.
Ofwat has refused to comment on the report.
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Last month, Sky News revealed that representatives of Thames Water’s multinational syndicate of shareholders were quitting as directors of its corporate entities after refusing to inject the billions of pounds of funding required to bail it out.
The payment of the controversial dividend from Thames Water Utilities Limited, the operating business, to Kemble Water and its affiliates, is understood to have fallen foul of rules overseen by the regulator, which aim to avoid rewarding shareholders during periods of poor performance.
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Ofwat’s intention to take action against Thames Water over the dividend payment was reported last month but without any indication of the likely size of a penalty.
Thames Water refused to comment this weekend on the specifics of the proposed fine, but has previously said: “We take our licence obligations very seriously, including those relating to the declaration and payment of dividends.”
A default on part of its holding company debts in April has raised the prospect that Thames is heading towards special administration, a form of insolvency that would effectively leave the government liable for managing a company which serves nearly a quarter of Britain’s population.
Its bonds have plummeted to record lows amid fears that lenders face steep losses in any bailout deal.
The prospect of temporary nationalisation will place it among the most pressing domestic challenges facing the next government.
Last summer, Sky News revealed that Whitehall officials had started drawing up contingency plans for Thames Water’s collapse amid fears that it might not survive.
It has since parachuted in Chris Weston, the former Aggreko chief executive, as its new boss.
Ofwat declined to comment on Saturday on the proposed penalty.
Nissan is set to announce a leap in its cost-cutting plans that will see 20,000 jobs go globally, according to reports in Japan.
The carmaker, which employs around 6,000 workers at its sprawling manufacturing operations in Sunderland, had already let it be known last November that 9,000 roles would be going amid weak sales and rising costs.
But Japanese broadcaster NHK said on Monday it expected that total to more than double.
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Nissan, which was yet to comment on the claim, is due to reveal full year results covering the 12 months to March on Tuesday morning.
They are expected to show a net loss of up to £3.8bn due to a series of writedowns on the value of its operations.
They will be the first results Nissan has declared since the appointment of a new chief executive last month.
Ivan Espinosa issued a “significant” downgrade to Nissan’s outlook just three weeks ago.
If the job cuts report is true, it would amount to a 15% reduction in the company’s worldwide workforce.
New models of the Nissan Juke being assembled at the Sunderland plant. Pic:PA
It is not known if the Sunderland production facilities form part of any planned job cuts or production reductions, of up to 20%, that were reported.
Nissan has, on several occasions since Brexit, called the plant’s future into question before proceeding with investment plans.
It has invested £2bn in Sunderland since 2023 alone.
The company secured UK government money this year for a new electric powertrain manufacturing facility in Sunderland.
But a senior Nissan executive, Alan Johnson, warned more aid was needed just last month, arguing that the UK was “not a competitive place” to build cars.
Nissan, like rivals, is facing challenges on many fronts.
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US trade tariffs of 25% on all car imports has exacerbated pressure on its supply chain and sales.
The latter has been struggling due to weaker-than-anticipated electric car uptake.
But the vast majority of its cars made in the UK will be subject to a tariff of just 10% after the UK-US trade deal agreed last week.
It does not currently send Sunderland-made cars to the United States. Most are for export to Europe and the domestic UK market.
The US and China have agreed to slash trade tariffs on each other, a move Donald Trump has said was part of a “total reset” in relations.
The president said the 90-day truce followed “very friendly” talks between the two sides in Switzerland over the weekend and those discussions would continue..
“China was being hurt very badly. They were closing up factories they were having a lot of unrest and they were very happy to do something with us”, he told reporters at the White House.
The breakthrough was announced early on Monday – to the delight of fincial markets – by the leader of the US delegation, treasury secretary Scott Bessent.
US trade representative Jamieson Greer confirmed so-called reciprocal tariffs were now at 10% each.
In real terms, it meant the US is reducing its 145% tariff to 30% on Chinese goods. A tariff of 20% had been implemented on China when President Donald Trump took office, over what his administration said was a failure to stop illegal drugs entering the US.
China has agreed to reduce its 125% retaliatory tariffs to 10% on US goods.
Sector-specific tariffs, such as the 25% tax on cars, aluminium and steel, remain in place.
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Tariffs, taxes on imports of more than 100%, had been imposed on both sides. China was the only country exempt from a 90-day pause on the “retaliatory” tariffs above the base 10% levies applied by America.
Major retailers had been warning Mr Trump of empty shelves as US importers pause shipments.
Mr Bessent said after a weekend of negotiations in Switzerland, the countries had a mechanism for continued talks.
It’s the second major trade announcement made by the US in the last week, after a deal was secured with the UK on Thursday.
The move signals a willingness from the Americans to make deals on tariffs.
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Of all the fronts in Donald Trump’s trade war, none was as dramatic and economically threatening as the sky-high tariffs he imposed on China.
There are a couple of reasons: first, because China is and was the single biggest importer of goods into the US and, second, because of the sheer height of the tariffs imposed by the White House in recent months.
In short, tariffs of over 100% were tantamount to a total embargo on goods coming from the United States’ main trading partner.
That would have had enormous economic implications, not just for the US but every other country around the world (these are the world’s biggest and second-biggest economies, after all).
So the truce announced on Monday by treasury secretary Scott Bessent is undoubtedly a very big deal indeed.
Welcomed news
The news was received positively by Asian stock markets on Monday as major indexes were up.
In China, the Shanghai Composite stock index rose 0.8%, the Shenzhen Component gained 1.7%, and Hong Kong’s Hang Seng index was up nearly 3%.
In countries across Asia, benchmark stock indexes also rose. Korea’s Kospi grew 1.1%, Japan’s Nikkei was up 0.8%, while India’s Nifty 50 index of most valuable companies gained more than 3%.
US stocks rose sharply at the open.
The S&P 500 and tech-heavy Nasdaq saw their biggest leaps in more than a month, rising almost 3% and 4% respectively.
The market rally was visible in Europe too.
The dollar – hit in recent weeks by US recession speculation – was up more than a cent versus the pound while oil prices also rallied. Brent crude, the international benchmark, was 3.5% higher at $66 a barrel.
What next?
When asked by journalists about what the US wanted to see from China in the 90s, Mr Bessent said, “As long as there is good faith effort, engagement and constructive dialogue, then we will keep moving forward.”
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The UK came to the front of the line for deals, Mr Bessent added, “as our oldest ally”.
Switzerland had also moved to the “front of the queue”, he said, while the EU has been slower.
As with the other counties subject to 90-day pauses, a permanent deal will need to be reached, but confidence across the world is likely to have been boosted.
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Businesses now need a clear timetable and roadmap for future negotiations under the newly announced economic and trade consultation mechanism, said Andrew Wilson, the deputy secretary general of the International Chamber of Commerce.
“The credibility of that process for resolving underlying frictions in the Sino-US economic relationship will be mission-critical in terms of restoring business confidence.”
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