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Ofwat tightens rules over water company dividend payouts

The UK water regulator will be able to stop suppliers paying out dividends if they fail to meet performance standards.

Under new powers announced on Monday, Ofwat said it can block payments to shareholders if “they would risk the company’s financial resilience” and take enforcement action if the payouts are not linked to performance.

The Government said it backs the new proposed powers.

Ofwat, which oversees the sector in England and Wales, said the changes will cut the risks a firm’s poor financial health may pose to customers or its environmental responsibilities.

If a company falls short in supporting customers or the environment, Ofwat will be able to step in and take enforcement action, the watchdog said.

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David Black, chief executive officer of Ofwat, 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.”

The regulator said the changes could also “improve the attractiveness of investing in water and wastewater companies”.

Government water minister Rebecca Pow said: “It is wrong for water companies to be responsible for environmental damage and poor performance but not face the penalties.

“It has been happening too often and it needs to stop.

“These new powers, made possible through our Environment Act, will enable Ofwat to clamp down on excessive cash payouts and make sure companies put customers first.”

The Consumer Council for Water also gave its backing to the move by Ofwat.

Its senior director of policy, research and campaigns Mike Keil said: “We support these extra protections from Ofwat, which will help to prevent water company investors from being rewarded for failure.

“Customers expect their money to be spent wisely by water companies and protected if things go wrong.

“This is an essential part of building trust between water companies and the people they serve.”