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.

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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.

These 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.

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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.”

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As international criticism of Israel’s latest military offensive in Gaza mounts, Richard and Yalda ask how likely a ceasefire is in the coming weeks.

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Yalda unpacks her interview with a Hamas official, who has an interesting revelation about negotiations.

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A potential water war is in the making after India suspended the Indus Water Treaty.

The decision came in retaliation to terror attacks in Kashmir, which were followed by a four-day conflict between the two nuclear-armed neighbours.

Pakistan says, if not reversed, it amounts to an act of war. India’s response – blood and water cannot flow together.

What is the Indus Water Treaty?

The Indus Water Treaty (IWT) of 1960 governs how the six rivers that flow through India are shared.

While India gets unrestricted use of the three eastern rivers – the Ravi, Beas, and Sutlej, Pakistan is allotted the lion’s share of the three western rivers – the Indus, Chenab, and Jhelum.

The average annual flow of the western rivers (135.6 million acre ft) is more than four times that of the eastern ones (32.6 million acre ft).

Though India can use a fraction of the waters of the western rivers for irrigation and hydropower, it has to eventually release all the waters downstream.

Surinder Thapa, former chief engineer of the Baglihar Dam, who has been associated with the Indus Water Treaty Commission over the past 20 years, told Sky News: “It’s totally a biased treaty as it was not negotiated on minute technical parameters as there is unequal share of the volume of water.

“India has suffered and is still struggling with its water projects. Some have even closed because they have become economically unviable.”

How India could respond

India demanded a modification of the treaty under Article XII in 2023, to take into consideration its changing demographics, water and energy requirements, climate change disaster mitigation, and cross-border terrorism.

The treaty has provisions for modification under certain circumstances – but there are no clauses for unilateral exit or suspension. India is taking its position as a legal decision under international law.

It cannot stop water from flowing across the border, as it lacks storage infrastructure and the capacity to divert large amounts of water.

But there are ways in which India could potentially harm its neighbour – by not sharing data on the volume of water in the rivers, withholding flow or releasing or even tampering with the volume, that could affect agriculture, power generation, consumption, and even cause floods in Pakistan.

Pakistan’s reliance on the network

More than 80% of Pakistan’s irrigated land is watered by the Indus network.

Agriculture is its backbone, employing more than half its population and contributing almost a quarter of its GDP.

It is already one of the most water-stressed countries in the world. Disruption to its rivers would have massive effects on its economy and people.

Across the border in Pakistan, farmers are worried about the uncertainty of its neighbour.

Muhammad Nawaz, a farmer from Nikaiyan Da Kot in Gujrat, Pakistan, told Sky News: “Our government must respond, we already have nothing, and if they stop giving us water, then what is left for us.”

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Hassan Ullah, who lives in the village of Kot Nikka, said: “India is violating the agreements made with the government. Pakistan should take up this issue at the international level.”

Since the suspension, India has carried out flushing and desilting of its dams – helping to increase its storage and making its hydropower projects more efficient.

Mr Thapa said: “For all these years we cooperated 120% with Pakistan but they kept raising irrelevant technical questions only to delay our projects – causing huge financial losses.

“We don’t want to bleed people in Pakistan, but we are left with no option but to teach them a lesson of how much sacrifice we have made.

“We need to make huge storage dams and navigation projects with no checks by anyone anymore.”

Recent India-Pakistan conflict

The fraught relationship between the two nuclear-armed neighbours worried the world when both countries attacked each other. Dozens of people were killed and hundreds of livelihoods were destroyed on both sides of the border.

The village of Kot Maira in Akhnur district, just a couple of miles from the Pakistan border, has been one of the most targeted in the region.

Bari Ram, 59, had a miraculous escape. He left his home with his son just a few minutes before artillery shells destroyed it, killing all his cattle.

He told Sky News: “This happened after the ceasefire, everything is destroyed. We can’t sleep as we don’t know when the next bomb will fall.”

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In a hospital room in Jammu, 46-year-old Rameez is having his wounds dressed. He’s not completely out of danger as shrapnel is still embedded in his liver and ribs. He’s already lost a lot of blood and doctors don’t want to operate on him just yet.

But it’s not the physical pain that traumatises him as much as the loss of his twins, 12-year-olds Zoya and Zain.

They got caught up in heavy Pakistani shelling when they tried to escape from their home.

Their aunt Maria Khan told Sky News: “The bombs fell behind them while they were getting out, Zoya was hit at the back of her head, her ribs were broken and she was bleeding.

“My brother picked her up and within seconds she died in his arms. He saw a neighbour trying to resuscitate Zain, but he had already died.”

Unable to hold back tears, she added: “That’s why us who live on the border areas want only peace. We know and experience the effects of real war. Our innocent children have died. This pain is unbearable and unreplaceable.”

For the moment, the precarious ceasefire between the countries is holding. But for so many it has come too late.