Chris Loder MP has welcomed the news today that Ofwat has backed his calls for water company’s dividends to be linked to their environmental performance, following the MP’s major lobbying campaign in Parliament.
Chris said: “I rallied my colleagues in Parliament and led the charge to make it clear for water companies – if they fail to properly look after the environment, their shareholders should expect no big dividend payments. I’m very pleased that Ofwat have backed this call and are bringing in new powers to enforce this.”
Ofwat has announced new powers that will enable it to stop the payment of dividends if they would risk the company’s financial resilience and take enforcement action against water companies that don’t link dividend payments to performance.
The change will require company boards to take account of their performance – for customers and the environment – when deciding whether to make dividend payments. It will also 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.
By incentivising companies to strengthen their financial health, Ofwat will also improve the attractiveness of investing in water and wastewater companies. This, in turn, helps ensure the sector can continue to focus on the investment and performance improvements needed to protect customers and the health of our waterways.
As such, the regulator is modifying water company licences to:
- Require companies to take account of service delivery for customers and the environment, as well as investment needs and financial resilience, when deciding whether to pay dividends
- Require companies to hold a strong credit rating and to stop them paying dividends if their financial health is at risk
- Improve the transparency and consistency of company licences.
