The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Consolidated Water has confirmed the Water & Sewerage Corporation is examining “alternatives” to extending its Windsor plant water supply agreement for another five years, potentially jeopardising $7.5 million in annual revenues.

The BISX-listed reverse osmosis plant operator, in its 10-Q form filed with the US Securities & Exchange Commission (SEC), backed this and other previous Tribune Business disclosures by affirming it was continuing to operate Windsor until the Corporation made a final decision.

Noting that it had supplied the total water volume stipulated under the previous Windsor contract by July this year, Consolidated Water said: “We have continued to operate the Windsor plant under a proposal submitted to the Water & Sewerage Corporation to extend the existing water supply agreement by 144 million gallons to provide sufficient time for the Water & Sewerage Corporation to evaluate their options under the water supply agreement.”

As previously reported by this newspaper, the Water & Sewerage Corporation’s options are to either extend the existing supply agreement with Consolidated Water for another five years, at a rate to be negotiated; purchase all equipment, facilities and materials at Windsor from the company; or require it to simply remove them.

“We have submitted a proposal to the Water & Sewerage Corporation to extend the Windsor water supply agreement for five years and are awaiting their reply,” Consolidated Water confirmed.

“Representatives of the Water & Sewerage Corporation have indicated that they are evaluating alternatives to the extension of our water supply agreement.

“In response to a request from the Water & Sewerage Corporation, we have agreed to continue to operate the Windsor plant on the same terms through early September 2013 to provide the Water & Sewerage Corporation with additional time to make their decision.”

The financial cost of non-renewal for Consolidated Water could be significant, running into at least $7 million-plus in lost revenue annually.

The BISX-listed company added: “We are presently unable to determine if Consolidated Bahamas’ water supply agreement for its Windsor plant will be extended beyond September 2013 or, if extended, on what terms.

“We generated approximately $1.9 million, $3.6 million and $7.5 million in revenues from the operation of this plant during the three and six months ended June 30, 2013 ,and the year ended December 31, 2012, respectively.”

Tribune Business previously revealed that a May 23, 2013, legal opinion sent by the Attorney General’s Office to Robert Deal, the Water & Sewerage Corporation’s assistant general manager, strongly suggests that it - and the Christie administration - have decided not to extend Consolidated Water’s Windsor reverse osmosis plant contract for another five years.

The opinion, which was obtained by Tribune Business, described the Windsor water supply agreement as ending on May 2013, and that “the Corporation does not wish to renew it”.

The document obtained by Tribune Business suggested that the Water & Sewerage Corporation squeeze the Windsor plant purchase price downwards by reminding Consolidated Water of its “17 tax free years” as a monopoly supplier of water to it

The Attorney General’s Office’s opinion indicates that the Corporation was exploring whether there was a legal means of ‘doing it on the cheap’, as it asked the Government’s law office to determine whether it or Consolidated Water owned the physical plant.

The Attorney General’s Office concluded that the Water & Sewerage Corporation could not escape paying Consolidated Water a purchase price for the plant equipment and facilities.

Windsor’s capital cost had initially been pegged at $10.658 million, and the Attorney General’s Office said: “The parties will have to negotiate the price for the plant in accordance with the contract.

“The contract does not prohibit negotiation. In this agreement the Corporation provided the land and the contractor provided the plant.

“In determining a price, the Corporation may seek to remind the contractor of the value of the 17 tax-free years he has had free use of the land, while being allowed to be the sold producer of desalinated water in the Bahamas for that entire period.”