(Alliance News) - UK water services regulator Ofwat announced new powers that will enable it to stop the payment of dividends by water utilities if they would "risk the company's financial resilience".
It said it would also take enforcement action against water companies that don't link dividend payments to performance. Ofwat said the change will require company board to "take account of their performance" for customers and the environment when deciding to make dividend payments and will require companies to "maintain a higher level of overall financial health".
"These changes to company licences reduce the risks that a company's poor financial health may pose to customer interests and its ability to invest to protect the environment. If the company falls short, Ofwat will be able to step in and take enforcement action," the regulator said. London-listed water utilities include United Utilities Group PLC and Pennon Group PLC.
Ofwat Chief Executive Officer 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.
He added: "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."
By Tom Budszus, Alliance News reporter
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United Utilities (UU.)
Pennon (PNN)