The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A former Water & Sewerage Corporation chairman yesterday described the royalties it would have earned from the axed western New Providence water franchise agreement as “peanuts”, arguing that the state-owned utility should instead be the retail supplier for that area.

Don Demeritte, who held the post during the first Christie administration, told Tribune Business he backed the Government’s decision to declare the 25-year exclusive deal with the $14 million Consolidated Water/New Providence Development Company joint venture “null and void”.

Seizing on the May 7 (general election date) signing as evidence the agreement was “politically motivated” under the former Ingraham administration, Mr Demeritte told Tribune Business that “at best” the joint venture should merely be the bulk water supplier for western New Providence.

It would, he added, sell its reverse osmosis water to the Water & Sewerage Corporation, which would then supply residents and businesses in the area as the retail supplier - the same model that exists with the Blue Hills plant.

Describing this as the preferred solution, Mr Demeritte said the $1.50 per 1,000 gallons produced royalties that would have been paid by the joint venture to the Water & Sewerage Corporation paled into insignificance when compared to the revenue opportunities from supplying customers directly.

Numerous high-end businesses, such as law firms and offshore banks, plus communities such as Lyford Cay and Old Fort Bay, are located in western New Providence, and Mr Demeritte said there was an opportunity to levy higher tariffs given the level of affluence.

“I agree with Bradley Roberts. I knew it was politically driven, no doubt in my mind, to have everything signed at 12pm on election day,” Mr Demeritte said, adding that he was not sure whether the agreement had been approved by the Ingraham Cabinet.

“I’m glad the country took this stance. In my mind, it’s a very appropriate stance. I really agree with it. I want to see the Water & Sewerage Corporation successful. That’s the Corporation with the most upside.”

Describing the royalties as “peanuts”, the former chairman said the joint venture could have used its exclusive franchise rights to expand its base, potentially squeezing the Water & Sewerage Corporation out of the lucrative Baha Mar market when that project comes on stream in late 2014.

If the Water & Sewerage Corporation became the retail supplier for western New Providence, Mr Demeritte said this would result in “increased revenues, big time”.

Referring to the annual taxpayer subsidies to the Water & Sewerage Corporation, which peaked at $39 million in 2010-2011, Mr Demeritte said allowing it to supply the franchise area would “take a big chunk out of that”.

Mr Demeritte previously said that given the $7.75-$10 per thousand gallons water supply price that the Corporation was discussing under his watch, and the potential 100 million gallons per year supply, the NPDevCo/Consolidated Water joint venture was likely to earn in excess of $5 million per year - and more than $100 million, possibly up to $125 million - from the 25-year franchise agreement, depending on what it charged. And revenues would also rise as the customer base expanded.

“There’s a big difference between charging $15 per 1,000 gallons and $28 per 1,000 gallons for Lyford Cay and Old Fort Bay,” he said yesterday. “It doesn’t make sense, Consolidated competing with the Government.

“The solution going forward should be for the Water & Sewerage Corporation to be [the retail supplier], and the best case scenario for those guys would be to be bulk water suppliers.

“The franchise area should not be as large as they want it to be, and the Government should take additional steps to bring in additional competition on this island in reverse osmosis water. Consolidated should stop where they are.”

Mr Demeritte added: “They should continue to aggressively pursue revenue opportunities for the Water & Sewerage Corporation, and they shouldn’t allow firms to come in and cherry pick.”

Neither Alistair Henderson, NPDevCo’s president, nor Rick McTaggart, Consolidated Water’s chief executive, returned Tribune Business requests seeking comment.

However, sources close to Consolidated Water said the company believed it had “made some progress” in sorting out the issues over the franchise agreement with the Government and the Water & Sewerage Corporation.

“I think they’re making progress towards getting the issues resolved.” the source said. “Hopefully, it gets resolved over the next couple of weeks, and gets reissued. The Government just wants to make sure it gets formalised; it’s not that they don’t want it to go ahead.”

The source said the main problem was the fact the agreement was signed on the May 7 general election date.

They explained that the agreement had been completed several months prior to that, yet its final sign-off was consistently delayed, and the current government wanted to make sure there was noting wrong with it.