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Originally Posted by Mr K
Maybe the privatised companies could have take it out of the £1.6 billion in dividends they pay out every year.
Water should never have been privatised, it'll be the air we breathe next.
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Ofwat
controls what profits they can make, and the prices they can charge.
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Water and sewerage companies implement large-scale investment programmes to maintain their assets and meet their legal environmental and quality obligations. But the companies do not collect from customers all of the money they invest in the year in which they spend it.
So, companies must fund a large proportion of this investment from the competitive financial markets, either through borrowing (debt) or through investment from shareholders (equity).
Just as mortgage providers for homeowners expect a return on the finance (or capital) they lend, water companies must provide a reasonable return to providers of capital. This means that they must make a profit to reward their investors.
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Do Ofwat control dividends?
We have no formal powers to control dividends. But each company’s licence requires it to declare or pay dividends only in accordance with a dividend policy which has been approved by its Board and which complies with both of the following principles.
- The dividends declared or paid will not impair the ability of the company to finance the regulated water and sewerage business.
- Under a system of incentive regulation, dividends reward efficiency and the management of economic risk.
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How does it compare to other major European countries?