Thames Water dividend payouts in spotlight after shareholders pull funding

The UK’s largest water company Thames Water handed out millions of pounds worth of dividends in recent years (Alamy/PA)

The UK’s largest water company Thames Water is scrambling to find extra cash, as it handed out millions of pounds worth of dividends to shareholders and bonuses to top bosses in recent years.

Shareholders of the firm said on Thursday that industry regulations make its business plan “uninvestible”, after previously agreeing to an emergency funding package.

The stark update highlights the deepening financial woes for the firm which is sitting on a debt pile of £14.7 billion.

It has come under pressure from water regulator Ofwat to improve its financial performance amid mounting concerns over its future.

Despite the troubles, Thames Water revealed in December that it paid a £37.5 million dividend to a parent company.

When asked to explain the move by Ofwat, Thames said the money had been moved to help pay its debts.

In the year to the end of March 2023, it paid out about £45 million in dividends, and the previous two years it handed out a combined £53.9 million.

But the firm stresses that it has not paid a dividend to “external shareholders” for at least the past five years.

Thames Water, which has about 16 million customers across London and the South East, is owned by a consortium of pension funds and sovereign wealth funds.

It was previously owned by a consortium led by Australian financial services group Macquarie in 2008 for about a decade, during which it ran up debts of around £10 billion, while also paying out billions of pounds worth of dividends.

The company has also paid out about £3.7 million worth of bonuses, benefits and incentives to company executives over the past three years, according to research from the Liberal Democrats.

Total executive pay, which includes base salaries, surpassed £10.6 million over the past four financial years.

Last year, three executives took home more than £2.4 million.

Meanwhile, Thames Water was among water companies forced to return money to customers after failing to meet various performance targets set by Ofwat.

Under the review released in September, it was expected to pay a rebate of about £100 million for missing targets on reducing leakage, pollution incidents, supply interruptions, mains repairs and drinking water quality.