Thames Water accused of ‘chicanery’ over £150m dividend payment

A Thames Water sign at its Walthamstow Wetlands reservoir site. Photograph: David Levene/The Guardian

Thames Water has been urged to show greater transparency over its finances and was accused of “financial chicanery” after it emerged its board had approved a £150m dividend hours before its shareholders U-turned on providing emergency funding.

The Guardian revealed last week that the board of the struggling water supplier agreed to the payout at a meeting on 27 March.

The following day, the debt-laden company said its investors were no longer willing to provide £500m of funding they had previously pledged, raising the prospect that the company may be temporarily nationalised. Thames Water made no mention of the dividend payment at that point.

The water industry regulator, Ofwat, planned to investigate the circumstances around the dividend paid by Thames, sources said. The company was already under investigation over its decision to pay a separate £37.5m dividend at the time the £150m dividend was paid.

Britain’s biggest water supplier said the payment was made from the regulated company to an intermediate parent company, Kemble Water Eurobond, to “settle a pension top-up payment” and “surrender relief” on tax losses.

Gary Carter, GMB national officer, said: “Thames Water has once again shown an alarming lack of transparency.

“Of course GMB wants our members’ pension pots to get back in the black – but shareholders should be topping it up.

“Instead they’re taking money out of the regulated company, money needed to stop spills and pay our members’ wages.”

He added: “Thames Water needs to front up about its financial chicanery, while shareholders need to cough up to fill the pensions black hole – not customers or taxpayers.”

Liberal Democrat Treasury spokesperson Sarah Olney, who has called for Thames Water to be put into special administration by the government and reformed as a public benefit company, said: “This is a scandalous payout while our rivers are polluted with sewage and the company stands on the brink of bankruptcy.

“It is concrete evidence of why we need to abolish Ofwat and create a new water regulator with real teeth and power.

“The public will never forgive the Conservative party for how they have let water firms get away with financial mismanagement and environmental vandalism.”

The campaigner and former Undertones singer Feargal Sharkey said: “The dividend illustrates yet again the utter contempt and disdain that the water industry treats regulators and the politicians that oversee it with.

“Ofwat seems to have no ability to control them. There is an arrogance and contempt towards customers and regulators – that’s what happens when you have a company operating a monopoly with no proper oversight.

The £150m did not reach external Thames shareholders but did leave the ringfenced portion of the group’s complex corporate structure. Ofwat has been clamping down on the flow of cash from ringfenced water companies to holding companies, amid concerns that payouts are weakening the finances of regulated water companies.

Ofwat is due to publish its draft response to water firms’ five-year business plans on 11 July. Thames’s annual results need to be published by 15 July.

Thames Water has been approached for comment.