Thames Water defends tax liability as first half profits surge
Thames Water has announced a 19 per cent increase in pre-tax profit to £132.4 million for the first half-year.
The company also handed £50 million to its shareholders — who include Australia’s Macquarie bank and a group of investment funds — just weeks after asking its 14 million customers to pay nearly £30 extra on their bills next year.
When it asked for the bills hike, Thames Water claimed it had underestimated the costs of projects such as London’s new super-sewer. But the regulator, Ofwat, rejected its demand, and pointed out rival utilities had used the benefit of record low interest rates to invest more and help customers.
Thames Water households already pay an average £354 a year annual bill. Next year, it is planning on raising charges by inflation plus 1.4 per cent.
By contrast, the owner of South West Water, Pennon, yesterday vowed to freeze prices for the next two years to help its 800,000 customers, and Northern-focused United Utilities said it will not raise prices as much as it is permitted to by Ofwat to help save its customers money.
Thames’ results for the six months to October also reveal the utility has set aside £14.1 million for a possible fine, after Ofwat alleged it had misreported sewage flooding data.
However, finance director Stuart Siddall said: “Customers are really benefiting from these results. Thames Water’s bills are the second-lowest in the sector. We are going to double our customer assistance fund from £2.5 million a year to £5 million for the next four years to help those that are struggling. This is a set of results that is helping Londoners.”
On the distribution of £50 million to shareholders shortly after requesting Ofwat for a hike in prices, Siddall said that the dividend was “not much higher than the average FTSE 100 company”.
He added: “We have to make sure we remain an attractive investment, and can offer a sensible and acceptable return to shareholders and our debt providers.”
Thames also pointed out it invests £1 billion a year in ageing pipes and sewage infrastructure.
But the company — which was accused of “ripping off the taxpayer” after revealing it paid no corporation tax last year when it made £550 million in profits — today admitted: “We have not paid substantial amounts of corporation tax in recent years, primarily on account of capital allowances which allow us to delay, not avoid, payment of tax.”
Thames said it “contributes around £150 million annually to the public purse in other taxes”.
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