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Thames Water fired up over regulator's leakage figures

Thames Water is to divert pounds 40m from its discretionary investment programme next year to help meet tough new compulsory leakage targets from Ofwat, the industry watchdog.

The group yesterday hit back at Ian Byatt, the regulator, who had singled out Thames and Welsh Water, the two leakiest companies, as the worst offenders. Thames will have to cut its leakage by 19 per cent next year, but the company insisted it had already reduced its leakage rate this year by 10 per cent.

Bill Alexander, Thames Water's chief executive, said: "It's a big disappointment that Ian didn't draw attention to that and see fit to take into account this new information."

The attack came as Thames revealed an 11.6 per cent increase in its dividend payout, against a more modest 7 per cent rise in profits in the six months to the end of September to pounds 202m. Including the group's pounds 231m windfall tax bill, charged against the half-yearly accounts, Thames reported losses of pounds 61.2m.

The group sought to head off criticism of bumper dividend increases, arguing that the payout from its main regulated water and sewerage operations rose by just 7 per cent to pounds 48m. Thames said the rest of the headline dividend increase had come from its non-regulated businesses, where profits more than doubled from pounds 9m to pounds 19m. Despite the improvement, Thames shares slumped by 37p to 873p, ending a two- month surge in which the share price had outperformed the stock market by 9 per cent.

The company also attacked the way Mr Byatt had prepared his leakage figures, showing the amount of water lost per household. David Luffrum, finance director, said: "The important thing about leakages is what it's economic to do."