Published On:Thursday, March 18, 2010

By NEIL HARTNELL

Tribune Business Editor

CONSOLIDATED Water's Blue Hills reverse osmosis plant is using the least amount of power for any facilities of its size in the world, the BISX-listed firm's president and chief executive said yesterday, as its Bahamian operations increase gross profits by $264,000 year-over-year for 2009.

Addressing Wall Street analysts in a conference call, Rick McTaggart said Consolidated Water had made "significant progress" in enhancing efficiencies at its two Bahamian reverse osmosis plants, even though it was still owed $5.4 million in accounts receivables by the Government-owned Water & Sewerage Corporation as at December 31, 2009.

"The Blue Hills plant is operating at the lowest specific power of any plant of its size in the world, 13.5 kilowatts per 1,000 imperial gallons of water produced," Mr McTaggart said, adding that both the company and the Water & Sewerage Corporation "share equally" in the energy savings accruing from this.

He attributed the $1.2 million year-over-year increase in Consolidated Water's gross profits from its bulk water business, which includes the Bahamian operations, and rise in gross profit margin from 15 per cent in 2008 to 22 per cent in 2009, to "improved operating efficiencies at Windsor and Blue Hills".

He added: "We're very pleased with the significant progress made after grappling with, and eventually overcoming, membrane fouling at both desalination plants in the Bahamas."

In its 10-k report, filed with the US Securities & Exchange Commission (SEC), the only dark spot on Consolidated Water's Bahamian operations appears to be the inability of the Government's cash-strapped Water & Sewerage Corporation to make timely payments for the water it purchases from the two reverse osmosis plants.

Consolidated Water said: "As of December 31, 2009, Consolidated Water-Bahamas was due approximately $5.4 million from the Water & Sewerage Corporation. We have been informed previously by representatives of the Bahamas government that the delay in paying our accounts receivables is due to operating issues within the Water & Sewerage Corporation, that the delay does not reflect any type of dispute with us with respect to the amounts owed, and that the amounts will ultimately be paid in full.

"We have been informed by these representatives that monthly payments to Consolidated Water-Bahamas will continue from April 2010 through June 2010 in sufficient amounts to meet current invoices and reduce the amount of the delinquent receivables.

"Based upon these communications, we believe that the accounts receivable from the Water & Sewerage Corporation are fully collectible and therefore have not provided any allowance for possible non-payment of these receivables as of December 31, 2009."

However, the issue does appear to be impacting cash flow and liquidity for Consolidated Water's Bahamian operations, the company stating that it will be unable to replace the $1.911 million peformance bond it had previously obtained from Royal Bank of Canada - and which had expired on August 1, 2009 - until Water & Sewerage Corporation paid the sums owed.

"We expect to obtain performance bonds for the Windsor and Blue Hills plants once Consolidated Water-Bahamas has received payment of its delinquent accounts receivable from the Water & Sewerage Corporation," the company said.

Consolidated Water's contract with the Water & Sewerage Corporation accounts for the largest proportion of its revenues from any one customer, 26 per cent.

Turning to the performance of its Bahamian operations, Consolidated Water said: "Our Bahamas operations generated approximately $264,000 more in gross profits in 2009 than 2008, as a result of improved operating efficiencies for our Windsor operations located in Nassau, New Providence.

"We constructed and commissioned new feed water wells and replaced the reverse osmosis membranes on 50 per cent of our production trains at our Windsor plant, effective September 2008, and replaced the reverse osmosis membranes on the remaining production trains at the Windsor plant during the quarter ended June 30, 2009. These capital expenditures improved the energy efficiency of the Windsor plant.

"In addition, last year we implemented an improved feed water pre-treatment regime at our Blue Hills plant in Nassau, which has reduced electrical power consumption at that plant. Our overall bulk segment gross profit percentage for 2009 also benefited from a reduction in diesel and electricity prices."

Bank charges, though, increased by $158,000 in 2009 as a result of increased currency conversion charges incurred by Consolidated Water's Bahamian subsidiary to switch money from Bahamian to US dollars.