Water companies will not be allowed to distribute their profits to shareholders if this practice puts their financial resilience at risk.
That is part of Ofwat‘s new plans to overhaul the water sector – the new proposals unveiled today could also see water firms required to link their dividends with environmental protection and how they deliver services to customers.
If the company falls short, Ofwat will be able to step in and take enforcement action.
The proposals aim to ensure that companies will be able to weather financial pressures and unexpected shocks to their business, without compromising their delivery for customers.
David Black, Chief Executive, Ofwat said: “It is vital that companies have sufficient financial strength to withstand shocks and surprises.
“Our proposals today will raise the bar on credit quality and give us new powers to block dividends if a company is putting their financial stability at risk in making them.
“These changes should also ensure that companies engage with us earlier when they do see any concerns with their financial resilience.”