Thames Water has escaped being fined over its leakage record but will have to splash an extra £150m on fixing the problem.

The company - which has imposed a hosepipe ban in Oxfordshire - could have been fined up to £66m by regulator Ofwat after missing its targets on leakage, despite a boost in profits of 31 per cent.

However Ofwat has struck a legally binding undertaking from Thames that it would spend an extra £150m tackling leaks and a commitment to hit future targets by March 2010, it was announced this morning.

It's progress would be monitored and it could still face fines from next year.

Ofwat chairman Philip Fletcher said: "Thames Water's failure on leakage is unacceptable. Thames has bound itself to spend an extra £150 million, at the cost of its own shareholders, to replace more ageing pipes than planned.

"It is more than double the maximum possible fine which the regulator could have imposed. A fine would not have gone to protect customers, but to the Exchequer. This is the right answer for Thames' customers."