Ofwat announces new powers on water company dividends

The water regulator will also be able to take enforcement against water companies that don’t link dividend payments to performance.  

This change is designed to ensure company boards take account of their performance, both for customers and the environment, when deciding whether to make these payments. It’ll also require them to maintain a higher level of overall financial health.  

These modifications to water company licences will require firms to take account of service delivery for customers and the environment, as well as investment needs and financial resilience, when deciding to pay dividends.  

They’ll also be required to hold a strong credit rating and stop them paying dividends if their financial health is at risk and improve the transparency and consistency of company licences.  

This work is designed to both incentivise those companies experiencing financial health challenges to engage with the regulator promptly, as well as allowing it to intervene and take actions faster when companies fail take such steps themselves.  

Ofwat chief executive David Black said: “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.  

“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. 

“We hope the introduction of these new powers will focus minds around company board tables on the importance of responsible decision making and openness with customers and other stakeholders. And if that isn’t the case, we will act.”