The Tribune

By NEIL HARTNELL Tribune Business Editor JUST how far the Water & Sewerage Corporation has to go to achieve financial viability has been highlighted by several key financial performance indicators, which show it currently enjoys a -44 per cent operating income margin and an average receivables age of 307 days. The latter figure, which measures debt collection efficiency and shows the average age of the Water & Sewerage Corporation's receivables on a month-to-month basis, is some 3.41x (times) higher than the Government-owned entity's 90-day target. As for its EBITDA (earnings before interest, taxes, depreciation and amortisation) margin, data published by the Corporation as at October 18, 2011, showed that its -44 per cent margin was well below the o per cent (break even) target that it has set for itself. The Water & Sewerage Corporation's Key Performance Indicators are nevertheless a welcome effort at greater transparency, as they - possibly for the first time - give the Bahamian public a set of measurable objectives and targets against which its operating performance can be judged. Other areas where the Water & Sewerage Corporation has some work to do is in collection efficiency. Its ratio of due payments collected during a given month, compared to prior period customer billings, stands at 89.6 per cent. This indicates that in any given months, more than 10 per cent of the sums due to the Water & Sewerage Corporation are not collected from customers. The target goal, as set by the Key Performance Indicators, is 98 per cent. When it comes to covering its operating costs, the Water & Sewerage Corporation currently is earning enough revenues to cover just 69 per cent of these. This is a huge deficit, and well below the target ratio of 130 per cent. Elsewhere on the cost front, the Water & Sewerage Corporation's stated goal is to reduce its number of employees per 1,000 active water accounts from the current seven to five. It added that a five to 1,000 accounts ratio was detailed in a World Bank study of top 25 per cent developing country utilities. The goals for service coverage are no less ambitious. The Key Performance Indicators show that the percentage of households served by its supply to active residential customers stands at 48.9 per cent, a far cry from the 95 per cent ratio it aims to attain by 2020 - in eight years time. The picture was slightly better when it came to the Water & Sewerage Corporation's customer service. Some 81 per cent of 392 reported leaks from its system in New Providence were repaired within 48 hours, with 68 per cent of 202 customer complaints on the island dealt with in the same time period. As for sewerage complaints on New Providence, some 65 per cent of the 37 received were dealt with in 48 hours. The Water & Sewerage Corporation's goal is to address 95 per cent of these within 48 hours. A key component in improving all these ratios is, of course, the $81 million that the Water & Sewerage Corporation is undertaking with the Inter-American Development Bank to rehabilitate New Providence's water and sewerage systems. A key goal is to cut the Water & Sewerage Corporation's non-revenue water, which is water lost from its transmission and distribution system, by more than 50 per cent - from the existing 5.108 million imperial gallons per day to 2.5 million gallons per day by 2016. According to the IDB project document, reducing non-revenue water to such a level will generate a $3.5 million net present value for the Water & Sewerage Corporation, with a 14 per cent internal rate of return (IRR). "The main benefits ($41 million) are the result of the savings that households would obtain by eliminating the use of their own private wells, and also the value associated with additional consumption," the IDB said. "It is estimated that about 9 per cent of the beneficiaries of the investment program are poor households, as defined by the Bahamas' poverty line." As for rehabilitating New Providence's sewerage infrastructure, the IDB said the net present value of this undertaking was $3 million, discounted at a 12 per cent rate. The internal rate of return was 15 per cent. "Benefits due to cost savings to Water & Sewerage Corporation are $16 million, and by themselves cover investment costs. In addition, $1.4 million have been established as environmental benefits for the households connected to the sewerage system," the IDB said.