South West Water owner under fire for unveiling dividend after parasitic outbreak

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South West Water owner Pennon drew instant criticism from MPs after announcing a £127mn dividend to shareholders, days after a parasitic outbreak in drinking water in Devon.

The FTSE 250 group said on Tuesday it would increase its dividend by 3.8 per cent to £126.9mn, despite the company receiving a fine for sewage pollution last year and less than a week after 17,000 households and businesses were warned not to use their tap water for drinking without boiling it first. 

Anthony Mangnall, Conservative MP for Totnes, said: “Obviously it’s hugely disappointing at a moment where the public’s confidence in South West Water is at an all-time low they’ve decided to go ahead and pay out dividends. I have called for Pennon to suspend their dividend offering, which they can do, which they are able to do.”

Steve Barclay, the environment secretary, said last month that he shared the “anger and frustration” of members of the public about pollution in the rivers, demanding a “step change” from companies to protect waterways.

“It is completely unacceptable for this company to be paying a dividend to shareholders given its appalling record, including millions of pounds in fines last year for pollution offences and poor performance,” an ally of Barclay said on Tuesday.

Shares in Pennon dropped more than 5 per cent in trading on Tuesday to 679.5p.

Pennon said it would pay £3.5mn in compensation, or about £215 per household, to customers affected by the parasite contamination. More than 100 cases of cryptosporidium, an organism that can cause unpleasant symptoms such as diarrhoea and vomiting, have been found and the company is still working to resolve the issue. Last April, the company was fined £2.2mn for dumping sewage into rivers and the sea in Devon and Cornwall over four years.

Pennon said on Tuesday that the dividend increase was £2.4mn lower than it otherwise would have been following last year’s fine from the Environment Agency. 

The move by Pennon came as the Consumer Council for Water, an independent consumer body, warned on Tuesday that water companies want to raise their bills by as much as 91 per cent over the next five years once annual inflation of 2 per cent is included. Ofwat, the regulator, is due to issue a draft decision on the companies’ requests on June 12.

According to fresh figures released by the CCW on Tuesday, Southern Water is asking for the biggest increase — a 91 per cent rise by 2030 that would take average household bills to about £915 a year. Meanwhile, Thames Water, the UK’s biggest water company, is asking for a 59 per cent increase to £749 a year. Pennon is asking for a 33 per cent rise to £644 a year.

Mike Keil, chief executive of the CCW, told the BBC that bill rises were “going to come as a massive surprise to people”.

“People do want to see improvements, they do understand that takes investment, but I think the scale of what’s being proposed here is going to come as a real shock,” he said.