Thames Water have made an unexpected splash and rewarded their shareholders with an increased dividend payout, despite being criticised for dumping sewage and failing to address leaks. Set to capitalise most on a legal loophole are sovereign wealth funds in China and Abu Dhabi, and a pensions scheme for academic staff at UK universities.
While external dividends – paid to shareholders such as private equity, sovereign wealth and pension funds – are currently frozen, internal dividends which are paid to intermediate holding companies – owned by the same funds – are permitted. Taking advantage of this loophole, Thames Water paid out £37 million of internal dividends to its parent company Kemble Water Holdings in 2022, up from £33 million the previous year. The Financial Times referred to these as complex ‘byzantine structures’, which is coincidentally the era in which Thames Water’s infrastructure was last refurbished.

The Water Services Regulation Authority, Ofwat, have seen through the company’s attempts to muddy the waters and are preparing licensing conditions to block dividends from April 2025. In the meantime, dirty water dividends can flow freely to Thames Water’s esteemed shareholders which include China Investment Corporation, Abu Dhabi sovereign wealth fund Infinity Investments SA, and the Universities Superannuation Scheme, which is a pension scheme for academic staff at UK universities. Second largest shareholders (weighing in at 19.7%), university staff might be striking about pay but they’ll be pleased their pensions are being topped up excrementally.

Thames Water faced backlash last month for advising people to have shorter showers and flush their toilets less, while themselves taking a leak to the tune of 600 million litres a day with 24% of water lost in transit. So, they might want to think about piping down.