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Ofwat has requested Thames Water to clarify how a £37.5m dividend it paid to a dad or mum firm doesn’t break guidelines designed to guard prospects and the surroundings.
The water regulator stated it was investigating whether or not the dividend, which was introduced on Tuesday, was in keeping with the corporate’s licence necessities. It has not but opened a proper enforcement case.
Ofwat was instructed prematurely concerning the dividend, and stated it had written to the water provider final Friday, asking for a reply by the top of the month.
Thames Water stated the cash was merely being moved to a dad or mum firm to be able to assist pay its money owed, and that no dividends had 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 cost meets its licence necessities.
“Ofwat has requested Thames Water present extra info to reveal how, particularly, the dividend cost 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 evaluate any extra info the corporate gives and resolve whether or not there’s a case for additional motion.”
New guidelines had been launched in Could this 12 months to make sure that water corporations don’t pay dividends except 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 supply additional context and clarification” concerning the determination 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 enhancing service for patrons and to guard the surroundings,” it stated.
“Our plans assume no exterior dividends to shareholders till a minimum of 2030, to assist our turnaround.”
It comes as MPs stated they deliberate to carry Thames Water into parliament to reply questions.
The Setting, Meals and Rural Affairs Committee stated it wished the corporate to come back 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 12 months.
The UK’s greatest 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 nevertheless it spent a file £1bn on enhancing its community.
The outcomes additionally revealed its debt pile swelled by 7 per cent to £14.7bn.
Interim bosses stated “instant and radical motion” is required to enhance its environmental and monetary efficiency.
They added: “Turning across the Thames will take time. We merely can’t do all the pieces that our prospects and stakeholders want to see at a tempo and for a worth that everybody would really like.
“We’ll proceed to make the powerful selections required to ship what issues most to our prospects and the surroundings.”
The outcomes come simply days after it emerged that auditors of Thames Water’s dad or mum firm Kemble Water Holdings have warned it might run out of cash by subsequent April if shareholders don’t pump in more money.
PricewaterhouseCoopers (PwC) warned in accounts revealed final week at Firms Home that there’s a “materials uncertainty” over the way forward for Kemble – the primary firm behind Thames Water – amid worries there aren’t any plans in place to refinance a £190m mortgage at one among its subsidiary corporations.
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 12 months the corporate had requested traders for £1bn.
A Thames Water Utilities spokesperson stated: “We’re in a sturdy 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 situations, together with the preparation of a marketing strategy that underpins a extra centered turnaround that delivers focused efficiency enhancements for patrons, the surroundings and different stakeholders over the subsequent 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 might buckle beneath the load of its huge money owed.
The corporate – whose possession construction has been revealed to comprise a sophisticated internet of corporations behind the provider – has been saddled with money owed since privatisation and now faces greater curiosity on this debt as a few of it’s linked to the speed of inflation.
The group can also be set for a attainable investigation into whether or not it misled MPs earlier this 12 months over the state of its funds and assist from traders.
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