Watchdog to block shareholder payouts if UK water companies miss targets

theguardian.com:

The UK water regulator is to use new powers to block companies from shareholder payouts if they fail to hit performance and environmental targets.

Ofwat, which in December heavily criticised some of the country’s biggest suppliers over the size of dividend payments relative to their financial performance, said the new rules would also mean water companies would “maintain a higher level of overall financial health”.

“When deciding on dividend payments to investors, water companies need to take stock of their performance for customers, the environment, and the company’s overall financial health,” said David Black, the chief executive at Ofwat.

“Too often, this has not been the case. That is why we’re implementing changes that will allow us to better hold companies to account and take enforcement action when they get it wrong.”

The report was published after the Guardian revealed that the nine main water and sewerage companies had paid out £65.9bn in dividends in the last three decades. They have also taken on debts of £54bn since privatisation.

Ofwat, which is taking a tough stance with water companies after criticism that for years the firms have not been properly regulated, said that its new rules would improve the attractiveness of investment in the sector as well as “protect customers and the health of our waterways”.

In December, Ofwat released a report that found that poor performance was “the norm” at many water companies, in particular naming Northumbrian Water, Southern Water, South West Water, Thames Water, Welsh Water and Yorkshire Water.

The regulator is modifying water company licences to ensure they have a strong credit rating, with the power to stop them paying dividends of their financial health is at risk.

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