Thames Water has been fined a record £122.7m by Ofwat for breaching of rules relating to its sewage operations and shareholder payouts.
The penalty is the largest ever fine handed out by the water regulator.
Ofwat said the fine was as a result of its “biggest and most complex investigation” and that the sum would be paid by the company and its investors.
£104.5m of the penalty is connected to rule breaches over sewage operations. The remaining £18.2m is for breaches related to shareholder payouts.
A Thames Water spokesperson said: “We take our responsibility towards the environment very seriously and note that Ofwat acknowledges we have already made progress to address issues raised in the investigation relating to storm overflows.
“The dividends were declared following a consideration of the company’s legal and regulatory obligations.
“Our lenders continue to support our liquidity position and our equity raise process continues.”
Thames Water is currently in £20bn of debt, but was given an emergency loan £3bn in March to rescue them from collapse.
Ofwat’s chief executive David Black said: “This is a clear-cut case where Thames Water has let down its customers and failed to protect the environment.
“Our investigation has uncovered a series of failures by the company to build, maintain and operate adequate infrastructure to meet its obligations.
The company also failed to come up with an acceptable redress package that would have benefited the environment, so we have imposed a significant financial penalty.”
Environment Secretary, Steve Reed said: “The Government has launched the toughest crackdown on water companies in history.
“Last week we announced a record 81 criminal investigations have been launched into water companies. Today Ofwat announce the largest fine ever handed to a water company in history.
“The era of profiting from failure is over. The Government is cleaning up our rivers, lakes and seas for good.”