Britain's biggest water firm hit with record fine over sewage and dividends

Britain’s biggest water company has been fined almost 123 million pounds or $166 million for releasing sewage into rivers and streams while paying dividends to its shareholders

LONDON -- Britain’s biggest water company was fined almost 123 million pounds ($166 million) on Wednesday for releasing sewage into rivers and streams while paying dividends to its shareholders.

Industry regulator Ofwat said that Thames Water must pay 104.5 million pounds for failing to protect the environment, and 18.2 million pounds for breaking rules related to dividend payments. It's the biggest-ever penalty levied by the water watchdog.

Ofwat said that the company, which provides water and sewage services to 16 million people in and around London, failed “to build, maintain and operate adequate infrastructure to meet its obligations” and also paid “undeserved dividends.”

The U.K. government said that the fines “will be paid by the company and its investors, and not by customers.”

Thames Water is at the center of nationwide anger over sewage spills that have fouled lakes, rivers and beaches at a time when water and sewage companies are hiking bills to modernize aging systems and cope with the demands of climate change and population growth.

The cash-strapped company has teetered on the edge of insolvency under about 19 billion pounds in debt. It won court approval in March for 3 billion pounds in emergency funding to keep it from falling into government administration.

It is currently trying to push through a sale to U.S. investment firm KKR.

Consumers and politicians have criticized the company, arguing that Thames Water created its own problems by paying overly generous dividends to investors and high salaries to executives while failing to invest in pipelines, pumps and reservoirs. Company executives say that the fault lies with regulators, which kept bills too low for too long, starving the company of vital cash to fund improvements.

“We take our responsibility towards the environment very seriously and note that Ofwat acknowledges we have already made progress to address issues raised in the investigation relating to storm overflows,” Thames Water said in a statement.

“The dividends were declared following a consideration of the company’s legal and regulatory obligations. Our lenders continue to support our liquidity position and our equity raise process continues.”