The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government has taken “a major backward step” by axing a 25-year water franchise agreement for western New Providence, a former utilities minister yesterday warning the move could “further burden” Bahamian taxpayers.

Phenton Neymour, who as minister of state for utilities under the former Ingraham administration had responsibility for the Water & Sewerage Corporation, said the decision to “void” the agreement with the Consolidated Water/New Providence Development Company joint venture would cost the state-owned provider “millions of dollars”.

Under the 25-year deal agreed with the former Ingraham administration, Mr Neymour said that apart from an initial franchise fee, the joint venture would also have paid a royalty fee of $1.50 per 1,000 gallons produced to the Water & Sewerage Corporation.

The agreement’s axing, the former minister said, meant that the Water & Sewerage Corporation would be denied that additional revenue stream.

Those revenues, Mr Neymour said, would have bolstered the Corporation’s struggling financial position and potentially enable the Government to slash annual subsidies that peaked at $39.027 million in the 2010-2011 fiscal year.

Stating that he was “shocked” by the Christie government’s actions, Mr Neymour said the decision to tear up the western New Providence water franchise agreement would harm the Bahamas’ reputation both in the industry and among international investors.

Suggesting that previous PLP governments had caused the Bahamas to have “poor credibility” in the international reverse osmosis and water supply sector, Mr Neymour told Tribune Business: “The action reported by your paper appears to put a black eye on the credibility of the Bahamas government again.

“It sends a very bad signal, because Consolidated Water is a publicly-traded company that had an agreement supported by a Government which is now backtracking.”

Mr Neymour said it was “not unusual” for government-owned utilities in the Bahamas to enter into franchise agreements with private sector providers for certain areas, citing the former deal between BEC and Morton Salt for electricity supply in Inagua.

“There are standard agreements in place with a view to assisting the utility companies that are financially strapped, particularly the Water & Sewerage Corporation,” the former minister explained.

“The decision to move ahead with the franchise agreement with New Providence Development Company was part of the [Ingraham] government’s overall action plan for the Water & Sewerage Corporation.”

Mr Neymour said this plan was drawn up by himself, together with the Water & Sewerage Corporation Board and management team, and included the $83 million Inter-American Development Bank (IDB) financed project to overhaul the Corporation and the wider sector.

He told Tribune Business that the exclusive franchise area granted to the Consolidated Water/New Providence Development Company joint venture merely covered the communities the latter already supplied with water, plus its remaining landholdings in western New Providence.

“The area approved for the franchise agreement has always been supplied by New Providence Development Company for decades, so to consider this agreement ‘null and void’ is a step backward,” Mr Neymour told Tribune Business.

“What is also a major step backward........ is the Government, for the first time, charged the operators a royalty where they would pay to the Water & Sewerage Corporation $1.50 for every 1,000 gallons produced.

“The franchise agreement issued to New Providence Development Company and Albany was with the intention of providing the Water & Sewerage Corporation with additional revenue, because it is financially strapped.

“By making this agreement null and void, they’re putting an additional strain on the taxpayer of the Bahamas. This is a step backwards. It will be an additional tax burden.”

Mr Neymour is effectively implying that the loss of these royalty revenues could lead to increased subsidy demands being imposed on the Government and Bahamian taxpayer.

In recent years, subsidies to the Water & Sewerage Corporation peaked at over $39 million in 2011-2012, having hit more than $25.5 million the year before. Subsidy projections for the previous and current fiscal years are $20 million.

Mr Neymour said axing the 25-year agreement would cost the Water & Sewerage Corporation “millions of dollars”, noting that the royalties revenue stream was part of a wider initiative to eliminate government subsidies to it.

These earnings would have put its New Providence operations “substantially on the road” to self-sufficiency within five-seven years.

Mr Neymour added: “The Water & Sewerage Corporation would also regulate the franchise holders.

“We were moving forward in terms of adding additional regulation and controls for producers of water, and ensuring better quality water was produced for the whole of New Providence. I’m very shocked at the PLP.”

Mr Neymour said the franchise agreement ‘u-turn’ was “politically motivated”, citing as evidence for this Consolidated Water’s statement that the Corporation said the Government ‘told it’ to axe the deal.

The former minster said the main “push” for the franchise agreement came from the Water & Sewerage Corporation’s management.

He added: “It’s clear from the letter you quoted that directive either came from the Board, which was appointed by the Government, the Minister or Prime Minister.

When asked by Tribune Business whether the franchise agreement itself was ‘politically motivated’, given that it was signed on the May 7 general election date, Mr Neymour dismissed the timing’s significance.

He said the franchise agreement had been under negotiation for two years, and “should have been signed off much earlier”.

The agreement, Mr Neymour said, was ready for signing at the beginning of 2012, but became delayed after New Providence Development Company lost its original supply partner, forcing it to turn to Consolidated Water.

The former minister, though, could not confirm information reaching Tribune Business that suggested the franchise agreement was signed - but subject to Cabinet approval. If so, that would have left the final decision in the hands of the Christie administration.

Glen Laville, the Water & Sewerage Corporation’s general manager, yesterday told Tribune Business: “It would not be appropriate for me to comment on it, as the chairman has commented on it and it is under review by the Government.”