The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Water & Sewerage Corporation’s main supplier yesterday said it sees a ‘silver lining’ in the leak prevention programme that caused a $2.5 million year-over-year reduction in its Bahamian subsidiary’s revenues.

Rick McTaggart, BISX-listed Consolidated Water’s chief executive, told Wall Street analysts via a conference call that while the revenue drop appeared to “raise concerns”, they needed to “look deeper” into the long-term implications.

He suggested that the reduction in water system losses, which had reduced the Corporation’s demand for its supply, could ultimately help it secure more customers on New Providence.

Mr McTaggart said the Water & Sewerage Corporation supplied just 30 per cent of the available New Providence market, with most businesses/homes relying on private wells.

He added that the improved service and reliability stemming from the reduced water losses could help the Corporation make inroads into winning those potential customers, which in turn would create increased demand for the water produced by Consolidated Water’s Blue Hills and Windsor reverse osmosis plants.

Mr McTaggart said the Corporation’s agreement to supply Baha Mar would also boost its reliance on Consolidated Water, while the reduced leaks would cut its financial losses, enabling it to make more timely - and in full - payments to the BISX-listed supplier.

Conceding that Consolidated Water’s bulk segment saw a $400,000 year-over-year decline as a result of the Water & Sewerage Corporation’s success in detecting/mitigating system leaks, Mr McTaggart emphasised that this was not all bad.

“While on the surface the Bahamas numbers raise concerns for our business, if you look deeper you see positive developments,” he told the investment analysts.

“The Water & Sewerage Corporation lost 50 per cent of the water from leaks in its distribution system, and this significant cost was a factor in the Corporation’s prior financial problems that resulted in delayed invoice payments to us.”

Tribune Business revealed on Monday how the Water & Sewerage Corporation had managed to slash the debts it owed to Consolidated Water by almost 50 per cent in 2014, cutting them from $13.9 million to $7 million by end-December - a $6.9 million drop.

Much of those payments are likely to have come from Bahamian taxpayer subsidies, but Mr McTaggart continued to emphasise the potentially positive knock-on impact the Corporation’s $81 million water loss reduction programme could have for Consolidated Water.

Pointing out that the Corporation supplied just 30 per cent of New Providence’s customer base, and its near-300,000 population, Mr McTaggart said there was “tremendous potential to increase sales” for it on the island.

Acknowledging that the Corporation’s “financial success and sales is closely linked to our financial success”, the Consolidated water chief executive praised Baha Mar’s $3.5 billion project as “very impressive”.

“This new water demand from Baha Mar and demand from customers not connected to the Water & Sewerage Corporation system in Nassau will positively impact our Bahamas business,” Mr McTaggart said.

“These water savings will ultimately be taken up by new customers, and we think there is potential for growth in that market. I know they’ve signed an agreement with Baha Mar to supply their water so that’s done, it’s in progress.

“Our take on the prior situation is that they [the Corporation] were finding it hard to provide reliable service because of the level of leaks in the system, and this has gone a long way to resolving that. Before they were having problems managing the demand as well as the leaks.”

Mr McTaggart said the Water & Sewerage Corporation had purchased “slightly” more than the minimum water quantity it is contractually obliged to buy from Consolidated Water in 2014, although during some months it fell below these levels.

The Bahamas accounts for 40 per cent of Consolidated Water’s top-line revenues, making it the most important territory in which the company operates. However, bulk water operating income was down from $10.103 million in 2013 to $9.742 million.

“The decrease in bulk revenues of approximately $759,000 from 2013 to 2014 is attributable to our Bahamas operations, which generated approximately $2.5 million less in revenues in 2014 than in 2013,” Consolidated Water revealed in its 10-K filing with the US SEC.

“The 2014 revenue decrease for our Bahamas operations resulted from a decrease in the volume of water sold (primarily from our Blue Hills plant) to the Water and Sewerage Corporation of the Bahamas.

“In 2013, the Corporation purchased water volumes from our Blue Hills plant that were significantly higher than the minimum amounts they were required to purchase under the water supply agreement for this plant,” the company added.

“However, as a result of water conservation and loss mitigation efforts it has conducted since that time, the Corporation has significantly reduced the amount of water lost by its distribution system and consequently decreased the volume of water purchased from our Blue Hills plant in 2014 (although the Corporation continued to purchase more in 2014 than the contract minimum amount).”

The volume of water supplied to the Corporation by Consolidated Water’s Nassau plants fell by 17.4 per cent year-over-year, dropping from 4.6 billion gallons to 3.8 billion in 2014.