Ofwat plans to place significantly tighter restrictions on dividend payments after April 2025, in an attempt to ensure that water companies in England and Wales maintain sufficient financial resilience to cope with future external shocks. The regulator is proposing that from AMP8 onwards, any company should face a cash lock-up - which would prevent its regulated utility business from paying dividends to holding companies or shareholders-if one or more of its credit ratings falls to mid triple-B, with a negative outlook. This is one notch higher than the present lock-up trigger of Baa3/BBB- with a negative outlook, signalling that Ofwat clearly no longer believes the minimum investment-grade rating to be adequate. "The present minimum standards in company licences allow companies' financial resilience to deteriorate too far before distributions outside the regulatory ring-fence are restricted," the regulator explained in a formal consultation document issued at the end of last month.
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