South Shropshire MP Philip Dunne welcomed last week’s Ofwat’s recent announcement that it has been given new powers to stop the payment of dividends that could risk a water company’s financial resilience.
This move will incentivise water companies to focus on improving their financial health, while ensuring they prioritise service delivery to customers and the environment.
The changes to water company licences require boards to consider performance for customers and the environment, as well as investment needs and financial resilience, when deciding whether to make dividend payments.
These new rules also require companies to hold a strong credit rating and to cease paying dividends if their financial health is at risk. The new powers will reduce the risks posed by water companies' poor financial health and encourage them to engage with Ofwat promptly to avoid enforcement action.
By improving transparency and consistency of water company licences, Ofwat is taking steps to ensure the sector can continue to focus on investment and performance improvements needed to protect customers and the health of rivers and waterways.
Commenting Philip Dunne said:
“I welcome these new powers for Ofwat to stop payment of dividends that could risk a water company's financial resilience.
“Water companies have been making profits despite sewage harming human health and ecosystems. Some companies have stopped paying dividends in recent years, and others have woken to the challenge in investing to reduce sewage discharges.
“Ofwat limits future dividends but restoring waterways will take time. Dividends should fund environmental protection. Companies must balance infrastructure investment with sewage prevention. Only after satisfactory service should shareholders receive dividends”.