The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Water & Sewerage Corporation reduced the debt owed to its main BISX-listed supplier by almost $2m during April 2020 despite suffering a 61 percent revenue decline for the same month.

Consolidated Water, which supplies the corporation with all the water sold to the latter’s New Providence customers, revealed in regulatory filings that the state-owned utility slashed the sum it owes from $17.8m at end-March 2020 to $16m at April 30.

The company’s 10-Q form, filed with the US-based Securities & Exchange Commission (SEC) as it unveiled its 2020 first quarter results, did not explain how the Water & Sewerage was able to reduce the receivables balance owed to it amid revenue declines of 38 percent and 61 percent for March and April, respectively, due to the COVID-19 pandemic.

However, the Water & Sewerage Corporation’s ability to cut its debt is likely to be linked to a one-off payment it received from the government. Adrian Gibson, the corporation’s executive chairman, told Tribune Business in a recent interview that the government paid $5m in March 2020 - a 150 percent increase on the $2m it provided the year-before - to reduce “their receivables” to the water utility.

The government payment was not factored into the year-over-year revenue declines for March and April 2020. Still, despite the 10 percent reduction in the Water & Sewerage Corporation’s debt, Consolidated Water said the $16m outstanding balance continued to pose a threat to the liquidity of its Bahamian subsidiary which owns/operates the Blue Hills and Windsor reverse osmosis plants.

The BISX-listed supplier also warned investors that the COVID-19 pandemic, and its economic impact on both the Water & Sewerage Corporation and its customers, could further worsen delays experienced in receiving due payment for its services. It blamed recent hold-ups on the fall-out from Hurricane Dorian.

“Consolidated Water (Bahamas) accounts receivable balances due from the Water and Sewerage Corporation of The Bahamas amounted to $17.8m as of March 31, 2020, and $18.4m as of December 31, 2019,” the BISX-listed water supplier said in its SEC filings.

“Approximately 75 percent of the March 31, 2020, accounts receivable balance was delinquent as of that date. The delay in collecting these accounts receivables has adversely impacted the liquidity of this subsidiary. As of April 30, 2020, Consolidated Water (Bahamas)’ accounts receivable from the Water and Sewerage Corporation totalled approximately $16m.”

Given that all past due debts had previously been paid by the Water and Sewerage Corporation, Consolidated Water said it had never needed to make a provision for outstanding sums of money that were either past due or delinquent.

“We believe the delays we have experienced in collecting Consolidated Water (Bahamas)’ receivables were extended due to the impact of Hurricane Dorian, which devastated the northern Bahamas in September 2019,” the company added. “In addition, the economic impact of COVID-19 on The Bahamas government’s revenue sources may further delay the collection of Consolidated Water Bahamas’ delinquent accounts receivable from the Water and Sewerage Corporation.

“If Consolidated Water (Bahamas) continues to be unable to collect a significant portion of its delinquent accounts receivable, one or more of the following events may occur. Consolidated Water (Bahamas) may not have sufficient liquidity to meet its obligations; we may be required to cease the recognition of revenue on Consolidated Water (Bahamas) water supply agreements with the Water & Sewerage Corporation; and we may be required to provide an allowance for Consolidated Water (Bahamas) accounts receivable.

“Any of these events could have a material adverse impact on our consolidated financial condition, results of operations and cash flows.” Consolidated Water added that it has yet to see a reduction in the Water & Sewerage Corporation’s demand for its product despite the COVID-19 pandemic although this was likely to change if economic conditions do not improve in the coming months.

“The volume of water Consolidated Water Bahamas sold to the Water & Sewerage Corporation did not vary significantly from March 2020 to April 2020, despite the downturn in economic activity on New Providence that began in April 2020 that stems from the preventative measures taken by the government in March 2020,” Consolidated Water said.

“However, we believe that at some point in the coming months, if the current economic conditions in The Bahamas do not improve, Consolidated Water (Bahamas) will experience a decrease in the demand for its water, with a resulting decline in its revenue.

“In addition, the economic impact of COVID-19 on The Bahamas government’s revenue sources may further delay the collection of Consolidated Water (Bahamas)’ delinquent accounts receivable from the Water & Sewerage Corporation,” the BISX-listed water supplier added.

“Consolidated Water (Bahamas)’ operations have been designated as essential services by the Government of The Bahamas. Presently, Consolidated Water (Bahamas)’ day-to-day operations have not been materially impeded by COVID-19 – we continue to produce and supply water to meet the requirements of our two water agreements with the Water & Sewerage Corporation. We believe Consolidated Water (Bahamas) has sufficient spare parts and consumables inventories to continue normal operations for the remainder of 2020.”