The Tribune

By NEIL HARTNELL

Tribune Business Editor

THE Water & Sewerage Corporation will "definitely need" an increase to the existing $20 million taxpayer subsidy allocated to it for the 2011-2012 fiscal year, its general manager saying efforts to "completely transform" the state-owned provider should become evident in three-five years' time.

Glen Laville confirmed to Tribune Business that the Corporation would need a "top up" to last May's government Budget allocation to it, due to the need to pay down the $8.3 million in accounts payables owed to its main reverse osmosis supplier, BISX-listed Consolidated Water, at end-February 2012.

While unable to specify how much more the Bahamian taxpayer will be required to provide, Mr Laville said the size of the debt owed to Consolidated Water gave a good indication, hinting that the final sum could be close to $30 million.

Acknowledging that the situation stemmed from the Water & Sewerage Corporation's existing financial and operational woes, Mr Laville told Tribune Business that it had decided to hold-off signing a water supply contract with New Providence Development Company in the hope that an initiative to reduce its non-revenue water losses by $80 million over a 10-year period will bear dividends.

That initiative, part of the recently-agreed $81 million loan from the Inter-American Development Bank (IDB), is intended to reduce water losses from the Water & Sewerage Corporation's system - savings that, if realised, would eliminate the need for further water supply agreements.

Asked by Tribune Business what the Water & Sewerage Corporation planned to do about the $8.3 million debt owed to Consolidated Water, almost $4 million of which was run up during the first two months of 2012, Mr Laville replied: "This will definitely be addressed.

"Even though we get into these situations, and it seems to happen every year unfortunately, typically we have it resolved by June before we go into the next Budget year. I don't have any doubts about that.

"It's one of those unfortunate things, and until we can stand on our own we have to rely on top ups, so to speak, from the Government."

The Water & Sewerage Corporation is due to receive a $20 million government/taxpayer subsidy for the fiscal year that ends on June 30, 2012. That is a $2 million increase upon the previous year, but still down from the $34.865 million and $25.533 million allocated to it during the 2008-2009 and 2009-2010 fiscal years.

That $20 million for 2011-2012 is set for an increase, though, that is likely to match - and probably exceed - the $25 million-plus subsidy granted in 2009-2010.

"We are definitely going to need more than that. There will have to be an increase," Mr Laville said of the current planned $20 million subsidy. While any increase would have to be determined by the Government, via Cabinet, the general manager said the size of Consolidated Water's bill "will give you a good idea of where we will end up".

"The reality is it comes back to some of the things pointed out when doing the IDB loan," Mr Laville explained to Tribune Business. "If we continue along this current course, the Corporation will require $400 million in subsidies over the next 10 years, but if we go through with the plans we have we will reduce that by $200-$250 million. The numbers speak for themselves. It's a no brainer."

Mr Laville said that once the non-revenue water situation, together with the legal and regulatory framework for the Bahamian water industry were addressed, the Water & Sewerage Corporation's New Providence operations should "stand on their own".

Not only would this reduce the demand for taxpayer subsidies, but the Water & Sewerage Corporation would be free to focus them on the Family Islands and developing its infrastructure there, rather than "concentrating" them on New Providence.

"It takes a while," Mr Laville said of the planned improvements from the $81 million IDB project. "Even though we've signed the loan, it's a five-year loan, so over the next three-five years we will see the effects of what we are doing.

"There will be some short-term benefits. Once we get mobilised on non-revenue water, the contract we signed in February, customers will see the benefits next year through more capacity, but also from a pressure and reliability perspective."

Miya/Veritec, the group charged with reducing the Water & Sewerage Corporation's non-revenue water losses, has already held preliminary meetings in Nassau and is due to return in mid-April. This is when the "real nitty gritty" starts in terms of analysis and testing, with Miya due to commence physical construction works in January 2013.

Noting that the project aimed to cut the Water & Sewerage Corporation's non-revenue water losses by around 50 per cent, from five million gallons per day to 2.5 million gallons in five days, Mr Laville told Tribune Business: "That saves us 10 billion gallons over a 10-year period.

"That has a savings value of $80 million just over 10 years alone. That project deals with that.

"When you look at the regulatory and legislative part of it, establishing an independent environmental regulator and having URCA take over regulation gives consumers a very strong framework for dealing with tariff adjustments. Consumers will have an independent regulator overseeing the Water & Sewerage Corporation, ensuring it is properly providing its services and running efficiently."

Describing the IDB-financed project's intended overall impact, Mr Laville added: "It's a complete transformation. What we're really looking to do, over a three-five year period, is to really transform ourselves into a more efficient and productive organisation."

When it came to the long-running negotiations between the Water & Sewerage Corporation and New Providence Development Company over the latter's bid for a franchise agreement for water and wastewater treatment services supply in western New Providence, Mr Laville said the franchise would be confined to areas owned or already supplies by the company.

"What they are getting is a formalised franchise agreement for that area. They did not get an expansion of that existing area," the general manager told Tribune Business.

Confirming that the negotiations with New Providence Development Company were "still under review", Mr Laville said the Water & Sewerage Corporation had also "decided to put on hold" plans to purchase water from the real estate/infrastructure developer.

This move, he explained, had been sparked by the IDB loan and the non-revenue water project. "We don't want to purchase too large a water production capacity and finds that, over the years, we're left with this excess capacity we're not paying for," Mr Laville added.

"We decided to hold-off on that until we see how this non-revenue water project goes. We're hoping that we do not have to get additional water from them as well."