The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Water & Sewerage Corporation’s leak reduction initiative has cut water volumes purchased from its BISX-listed supplier by 20 per cent, it was revealed yesterday, slashing its top-line for the first nine months by 2014.

But Consolidated Water’s top executives disclosed they are not losing too much sleep over reduced demand for the water supplied by its Nassau-based Blue Hills and Windsor reverse osmosis plants.

David Sasnett, the BISX-listed water supplier’s chief financial officer, said the profit margins generated on that 20 per cent were minimal compared to what Consolidated Water earned on the minimum volume it was required to supply.

The Water & Sewerage Corporation’s demand has returned to the ‘minimum’ volume it must buy from Consolidated Water under the terms of their contract, and the latter’s executives expect no further decrease as a result.

Rick McTaggart, Consolidated Water’s chief executive, told a conference call with Wall Street analysts that the water volumes purchased by the Water & Sewerage Corporation had “gradually lessened” as the leakages from the latter’s distribution system were reduced.

“This is a programme our customer, the Government, is undertaking to reduce losses,” he added.

With Consolidated Water’s contract stipulating a minimum quantity of water that the Water & Sewerage Corporation must buy ‘on a take or pay basis’, Mr McTaggart said “we wouldn’t expect any further decrease” in the amount supplied.

“We expect the Corporation to continue purchasing the minimum amount stipulated in the contract,” he added.

Mr Sasnett then said: “They [the Corporation] were buying amounts significantly in excess of the minimum; 20 per cent more.

“Those incremental sales delivered to the Bahamas government, we don’t make much profit on those excess sales. We make most of our money from the minimum sales.”

Consolidated Water’s financials showed that revenues from its bulk water sales to the Water & Sewerage Corporation fell by $981,000 and $1.7 million for the 2014 third quarter, and first nine months, respectively.

These reductions represent savings for the Government, Water & Sewerage Corporation and, by extension, the Bahamian taxpayer as a result of the water loss reduction programme.

This has been undertaken by the Water & Sewerage Corporation as part of an $81 million Inter-American Development Bank loan initiative, with the work carried out by its contractor, Miya.

Glen Laville, the Water & Sewerage Corporation’s general manager, previously told Tribune Business that Miya has to-date reduced water losses from its distribution system from 6.9 million gallons per day to 4.5 million gallons per day on a month-to-month basis.

The ultimate goal is to reduce non-revenue water losses to two million gallons per day by the project’s seventh year. The Water & Sewerage Corporation, and the taxpayer, were losing around $16 million annually at the 6.9 million gallon ‘starting point’.

The reduction in the Water & Sewerage Corporation’s debt owed to Consolidated Water also generated further savings for Bahamian taxpayers, as it lowers the interest the BISX-listed company was charging on these accounts receivables.

“Interest income increased to $334,499 for the three months ended September 30, 2014, from $232,820 for the three months ended September 30, 2013, due to interest on past due accounts receivables from the Water and Sewerage Corporation,” the SEC filings said.

“Interest income increased to $874,203 for the nine months ended September 30, 2014, from $582,704 for the nine months ended September 30, 2013, due to interest on past due accounts receivables from the Corporation.”

Elsewhere, Consolidated Water’s regulatory filings with the US Securities Exchange Commission (SEC) revealed that a series of payments in 2014 has reduced the Water & Sewerage Corporation’s debt to it by $6.6 million.

And, more than 15 months after Consolidated Water’s contract to operate the Windsor reverse osmosis plant expired, the Christie administration has yet to decide whether to award the company a five-year extension or issue a Request for Proposal (RFP) to find a replacement.

“During May 2014, June 2014 and September 2014, the Water & Sewerage Corporation made significant incremental payments to reduce the past due amounts it owed to Consolidated Water (Bahamas),” the company’s SEC filings said.

“As a result, Consolidated Water (Bahamas) accounts receivable decreased by approximately $6.6 million from December 31, 2013 to September 30, 2014.

“A portion of these funds were invested in the $5 million certificate of deposit reflected on our September 30, 2014, consolidated balance sheet.”

As for the Windsor plant, Consolidated Water’s SEC filings said: “At the request of the Government of the Bahamas, we continue to operate and maintain the Windsor plant on a month-to-month basis to provide the Govern with additional time to decide whether or not it will extend Consolidated Water (Bahamas)’ water supply agreement for the Windsor plant on a long term basis.

“We are presently unable to determine if Consolidated Water (Bahamas)’water supply agreement for its Windsor plant will be further extended or, if extended, on what terms.

“Consolidated Water (Bahamas) generated approximately $1.5 million and $1.9 million in revenues during the three months ended September 30, 2014, and 2013, respectively, and approximately $4.8 million and $5.5 million in revenues during the nine months ended September 30, 2014, and 2013, respectively, from the operation of the Windsor plant.”

The issue of what to with the Windsor plant, and its future operator, was last year turned over to a Cabinet committee, but no decision appears to have been yet reached.

Windsor’s ageing plant and equipment mean it needs a multi-million dollar upgrade, and the longer the situation is unresolved, the greater the chance of potential supply disruption for the Water & Sewerage Corporation’s Nassau customers.

Consolidated Water’s general and administrative (G&A) expenses rose to $510,288 for the three months ended September 30, 2014, compared to $372,812 for the same period last year.

“The increase is primarily due to a $134,000 increase in banking fees resulting from wire/exchange fees incurred to transfer funds out of the Bahamas to repay intercompany loans,” Consolidated Water said.