The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

THE Water & Sewerage Corporation owed $9 million to its BISX-listed water supplier at year-end 2017, after reducing volumes purchased from it by 13.2 per cent.

Consolidated Water, the operator of Nassau’s Blue Hills and Windsor reverse osmosis plants, revealed in annual regulatory filings that the combined quantity of water supplied to the state-owned Corporation had declined from 3.8 billion gallons to 3.3 billion year-over-year.

Despite the significant year-end receivable it was holding from the Water & Sewerage Corporation, the company again declined to provide for this sum - which was 18.2 per cent less than at year-end 2016 - on the grounds that it has had no problem collecting what was due in the past. “From time-to-time, Consolidated Water (Bahamas) has experienced delays in collecting its accounts receivable,” Consolidated Water said in its 10-K filings with the Securities & Exchange Commission (SEC), the US capital markets regulator.

“Representatives of the Bahamas government have informed us that their previous delays in paying our accounts receivables did not reflect any type of dispute with us with respect to the amounts owed. To date, we have not been required to provide an allowance for any delinquent Consolidated Water (Bahamas) accounts receivable as such amounts were eventually paid in full.

“Based upon our experience, we believe that the accounts receivable from the Water & Sewerage Corporation are fully collectible, and therefore have not provided any allowance for possible non-payment of these receivables. Our accounts receivable balances due from the Bahamas government amounted to $9 million and $11 million, at December 31, 2017 and 2016, respectively.”

Consolidated Water’s filings, though, indicate that the ability of the Water & Sewerage Corporation to pay its bills in a timely manner is key to its cash flow.

“One bulk water customer, the Water & Sewerage Corporation, accounted for approximately 34 per cent of our consolidated revenues for the year ended December 31, 2017,” the company’s 10-K filing read.

“If the Water & Sewerage Corporation becomes unable for financial or other reasons to comply with the terms of our water supply agreements with them, or terminates either of our agreements with them for cause, our results of operations, cash flows and financial condition could be adversely affected.”

For the 12 months to end-December 2017, Consolidated Water said the Bahamas and Water & Sewerage Corporation proved a key driver of income from its bulk water operations, which rose by 6.1 per cent from $8.415 million to $9.307 million.

“Bulk segment revenues were $31.622 million and $29.647 million for 2017 and 2016, respectively,” Consolidated Water said, representing a 6.7 per cent increase. “The volume of water sold by our bulk segment increased by 4 per cent from 2016 to 2017.

“The increase in bulk revenues for 2017 is primarily attributable to our Bahamas operations, which generated approximately $2.054 million in incremental revenues due to a significant increase in the prices of diesel fuel and electricity from 2016 to 2017, which increased the energy component of our bulk water rates in the Bahamas, and a 6 per cent increase in the volume of water sold.

“Gross profit for our bulk segment was $10.556 million (33 per cent of bulk revenues) and $10.158 million (34 per cent of bulk revenues) for 2017 and 2016, respectively. Gross profit as a percentage of revenues decreased slightly in 2017 as compared to 2016 due to higher energy prices, as energy expense for our bulk operations was approximately $1.56 million more in 2017 than in 2016, and as a result of an 18 per cent decrease (excluding energy pass through adjustments) in the price of water sold by our Windsor plant in the Bahamas that became effective at the beginning of 2017.”

The 18 per cent decrease in the price of water supplied by the Windsor plant resulted from the new contract agreed with the Water & Sewerage Corporation in December 2016. This extended the deal with Consolidated Water for 15 years, and requires the company to provide a minimum of 16.8 million gallons per week.

“Pursuant to the amended agreement, Consolidated Water (Bahamas) is required to complete capital improvements to the Windsor plant to ensure that the plant can meet its performance guarantees during the extended agreement period,” the company’s filings said.

“The per gallon price for the water supplied under the extended agreement, excluding the pass-through energy component, is approximately 18 per cent less than the price in effect at December 31, 2016. The remaining terms of the amended agreement are substantially consistent with those of the original Windsor water supply agreement.”