Ofwat has announced it would fine Thames Water nearly £123m, its largest penalty ever issued, following two investigations into the company.

England and Wales' water regulator says the total amount of £122.7m will "be paid by the company and its investors, and not by customers".  

In what Ofwat calls its "biggest and most complex investigation", it has been scrutinising wastewater companies' operation, management and maintenance of their sewage treatment works and sewerage networks. 

Part of that investigation led to the water regulator proposing a £104.5m penalty on Thames Water, alongside an enforcement order which would require the company to take steps to ensure its compliance back in August 2024. 

The investigation found failings into Thames Water's management of treatment works and wider wastewater network which are in breach of the company's legal obligations.

David Black, Chief Executive at Ofwat, 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.  

"This decision provides certainty for the company for both its past failures and what we expect from the company to comply with its obligations in future.

"The company is seeking new buyers to fund its turnaround to provide better services for customers and the environment by improving operational performance and financial resilience.

"This provides a clear opportunity to break with the past, Thames Water will now need to correct the issues our investigation has identified."

Environment Secretary, Steve Reed, commented: "The Government has launched the toughest crackdown on water companies in history.

"Last week we announced a record 81 criminal investigations have been launched into water companies.

"Today [28 May] Ofwat announce the largest fine ever handed to a water company in history.

"The era of profiting from failure is over. The Government is cleaning up our rivers, lakes and seas for good."

Ofwat has also confirmed that Thames Water will pay an additional penalty of £18.2m for breaches of rules relating to dividend payments in its second investigation.

This is the first time the regulator has used its powers to take enforcement action against a water company where their decision to make dividend payments does not properly reflect the company's delivery performance for customers and the environment.  

Mr Black added: "We are clear that dividends must be linked to performance for customers and the environment.

"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." 

Ofwat found that, interim dividend payments totalling £37.5m, made in October 2023 to its holding company, Thames Water Utilities Holdings Limited, and further dividend payments amounting to £131.3m, made in March 2024 broke the rules.

Whilst no cash left Thames Water as a result of the March 2024 payment, there was an extraction of value which Ofwat will be able to recover.

The company is now in cash lock up and no further dividend payments can be paid by the company without Ofwat's approval. 

A spokesperson for Thames Water 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."