The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Hurricane Dorian and the COVID-19 pandemic have dealt a “completely devastating” blow to the Water & Sewerage Corporation’s cash flow with April revenues down 61 percent, its executive chairman revealed yesterday.

Adrian Gibson, pictured, told Tribune Business the two catastrophic events had increased the urgency for the state-owned water utility to make “a paradigm shift” in its operations given that they had been “quite destructive” to its financial health.

In particular, he revealed that Abaco - the Water & Sewerage Corporation’s second largest market, and whose post-Dorian recovery has been slowed by the COVID-19 fall-out - suffered a 98 percent revenue decline year-over-year for April 2020.

Revenues collected on that island plunged from $230,000 in April 2019 to just $5,626 some 12 months later, with Mr Gibson disclosing that he will be seeking to obtain the government’s agreement for further reforms following the “double shock” inflicted by the back-to-back crises.

Among the issues he will be seeking to “settle” is a possible increase in the Water & Sewerage Corporation’s tariff rates, which have not been raised since 1999, although the executive chairman was quick to reassure customers no such move will occur in the near-term.

Mr Gibson added that he has also initiated an audit to ensure all the corporation’s customer accounts are properly classified, explaining that multiple businesses had been billed at lower residential rates for years and thus significantly underpaid for their water.

He urged customers who can continue to pay their bills to do so despite the suspension of disconnections for non-payment, warning that the Water & Sewerage Corporation’s “very survival and continuance” relies on what can cash flow it can secure amid the COVID-19 restrictions.

“We’ve had some little challenges along the way post-COVID-19 and post-Hurricane Dorian,” Mr Gibson told Tribune Business. “It’s been quite destructive to the corporation’s cash flow. The two of them have compounded an already-troubling situation.

“I’m going to write to my colleagues in the government with a view to settling on the way forward because obviously a paradigm shift is required, not only on the collection of existing debt and receivables but also exploring new business opportunities for the Water & Sewerage Corporation as well as the potential for a tariff increase.”

Mr Gibson emphasised that any increase in the Water & Sewerage Corporation’s tariffs remains some way off as the utility, as well as the Government, remains sensitive to placing an additional financial burden on customers already struggling with the loss of jobs and incomes amid the COVID-19 pandemic.

He suggested that any tariff rise could be restricted to certain “economic zones” or particular customer categories in a bid to protect the more vulnerable, although this would have to be approved by the Minnis administration’s Cabinet.

However, the fundamental obstacle to the Water & Sewerage Corporation attaining financial sustainability - with or without COVID-19 - remains the fact that its tariffs have not increased for more than two decades despite the cost of water produced by its reverse osmosis suppliers increasing to $40m per year. This has left the state-owned utility selling water below the cost involved in producing it, resulting in multi-million dollar annual losses.

Mr Gibson, meanwhile, said he had already initiated an audit of all the Water & Sewerage Corporation’s customer accounts to ensure they are properly classified. “There are persons who have businesses but are listed in the system as residential, so they are paying a residential rate,” he added. “I’m having that reviewed in an effort to have all accounts put in their proper category.”

Detailing Hurricane Dorian’s devastating impact on the Corporation’s Abaco business, Mr Gibson said revenue collected from customers on that island had declined by $1.043m or 94 percent for the period from July 1, 2019, to present.

“That downward spiral as it relates to Abaco began in September when there were major losses,” he added, “we had destruction to our system, and we took some facility losses. We also lost customers who lost their homes and businesses. We lost that revenue base and things, of course, were compounded by COVID-19 which dealt a devastating blow to the Water & Sewerage Corporation’s cash flow.”

Driven by Abaco’s losses, Mr Gibson said the Corporation’s cash flow across all Family Islands from July 1, 2019, to the present was down by 54 percent at $1.84m. Abaco revenues were down 88 percent year-over-year for March, falling from $330,000 in 2019 to just $37,000 this time around, while collections for the calendar 2020 first quarter stood at $57,000 compared to “nearly $1m” or $877,000 last year.

This, in turn, feeds into the Water & Sewerage Corporation’s total revenues for the same periods. Mr Gibson said cash collections for the period July 1, 2019, to-date had fallen by $7.04m or 28 percent year-over-year, dropping from $24.8m to $17.7m.

“It gets worse,” he added, noting that a breakdown of these figures showed New Providence revenues were off by 24 percent or $5.2m for the Water & Sewerage Corporation’s financial year-to-date. The “drastic decline” began in March when the month’s last two weeks were hit by the COVID-19 tourism shutdown and associated lockdown.

Mr Gibson said total revenues dropped year-over-year from $4.66m to $2.8m, a 38 percent decrease. Stripping out a one-time $5m payment on debts owed to the Water & Sewerage Corporation by the Government, the executive chairman said the utility’s total 2020 calendar first quarter dropped by 41 percent - falling from $10.47m to $7.24m year-over-year.

“In April we saw a faster decline,” he added. “In April, Water & Sewerage’s cash collections decreased from $5.676m in 2019 to $1.973m in 2020. April was down 61 percent. In New Providence it was down $2.6m or 59 percent, and for the Family Islands, 76 percent.

“We’re going to have to reassess some things in Abaco. In April 2019, we collected $230,000 there compared to $5,626 this year, a decrease of 98 percent... I don’t know if I would call it a double whammy. I call it completely devastating. It’s [Hurricane Dorian and COVID-19] a double strike at cash flow compounded by some other factors that must be assessed going forward.

“Even though we have ceased disconnections, I continue to encourage persons to come in and pay because, failing to do so, their bills will accrue over time. While the threat of disconnection no longer exists for the time being, persons should still understand these entity needs funds to continue.

“I encourage those who can pay to still pay. The very survival and continuance of the Corporation relies on the monies coming in. We don’t wish to be a drain on the Government, we don’t wish to be overly-reliant on subventions. That’s why we’re going to have to take steps to make sure the Corporation becomes self-sustaining and self-reliant going forward.”