Water Authority to be leased

| 16/08/2010

(CNS): Speculation surrounding government plans to lease one of its most valuable assets is raising concern from local staff and the opposition. Although government has not yet released the details of its intentions regarding the Water Authority, back-bencher and would be Cabinet minister, Cline Glidden, has said that it intends to lease the entity for 25 years to raise money. However, the terms of that lease have not been revealed and the opposition said that if government intends to divest its most successful asset on a long term lease, which aside from making a profit and keeping water costs down employs significant numbers of Caymanians, it would have to secure a significant amount of money each year for the public purse to make it worthwhile. (Photo Dennie WarrenJr)

Last week rumours mounted that the government was intending to sell off the Water Authority, which had caused considerable concern among the authority’s staff, CNS learned. However, government representatives visited the authority in an effort to reassure employees that jobs would not be lost. When CNS contacted the authority to ask about its future and that of employees, WA Director Dr Gelia Frederick-van Genderen said she was passing the enquiry on to the ministry, which has not yet answered the questions submitted.
 
Opposition MLA for George Town, Alden McLaughlin, said that, while he has not seen the details of this proposition, as the Water Authority had been a great success for government, paying money into the public purse, employing significant numbers of local people and keeping the cost of water at a very reasonable level, it would have to be a very good deal indeed to be worthwhile.
 
“Obviously before we can take a position and support this we would need to see the terms of the proposal, which government has not yet seen fit to reveal, but knowing what I already do I am struggling to see how this would improve government’s bottom line,” McLaughlin stated. He added that a one-off upfront payment may seem attractive to put cash in the treasury now but if there was not a regular yearly payment to government it would defeat the purpose.  
 
“It may be an attractive proposition togovernment now to take in a lump sum, but what happens the year after and the year after that,” he asked rhetorically, noting that the jobs and the low price of water also offered a valuable contribution to the local economy. He said the authority was one of the few government owned entities that was profitable and did not put a strain on government and actually added to the coffers each year. “I remain to be persuaded that this will be beneficial to government in the long term and we would have to be concerned about the local jobs as the Water Authority employs a lot of Caymanians, and many in very senior posts.”
 
Glidden appeared on Rooster’s morning talk radio show on Friday and stated that the government was considering an unsolicited offer to lease the authority for twenty-five years in order to raise cash for government. He did not reveal any details about the offer or where it came from but he said that Consolidated Water pays out some $8 million to its shareholders each year but government, the only shareholder in the Water Authority, did not even receive ten percent of that. Glidden said if government went ahead with the lease arrangement, it would still own the entity and regulate the authority.
 
CNS understand the offer is coming from Consolidated Water, which supplies water to residents in West Bay (who pay more than Water Authority customers) and which recently announced a fall in its second quarter profits this year as a result of problems it has encountered during a project it was contracted to do for the Water Authority.  (See Consolidated Water Q2 results here)
  
Although government had made no secret that it would entertain offers for divestment of any number of public sector entities, when it came to the Water Authority the government had focused on attracting investors for the development of the sewage treatment plant, which has reportedly attracted no significant interest. As a result it appears government is now entertaining the idea of offering up the entire authority in some shape or form in order to generate cash.
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  1. Anonymous says:

    If Government does not take up the social issues who else will do it, certainly not the private sector which is profit based. Government is not profit based, and has to consider the wider social effects and the protection of its people. It cannot and should not rely on the private sector to do so.

    A certain amount of employment by government is therefore expected in any society.

    Has the powers that be considered how much it will cost for the lease in real terms to Government? That is to say if there are jobs made redundant at the Water Authority, there will be less spending in the economy at a time when it is surely needed?

    How much will it cost Social Services, and the loss of people’s houses and assets which may translate into ruined lives?

  2. Anonymous says:

    Get it straight , this country not only belongs to a few no brain politicians. There is a group of Caymanians planning a march down to the glass house and we will back our beds there too and stay there if necessary until this idea leaves the heads of certain fools. We are tired of all this madness, it hurts when we see our Country being sold for only a few people to make a profit. Jim Boddens sh.. had more brain in it than some of the politicians heads now a days. Come on Arden give us some help we know that not only your hands are long but that your shoulders are broad and you are not intimidated by no one. You have your Country at heart.

  3. Anonymous says:

    I find that everyone is not looking at this the right way. Why are they wanting to sell or lease the Water Authority? Who benefits from this? The facilities are already in place and what will the gains be. Who are they fooling?

     

    • Anonymous says:

      Can somebody tell us who will be the lucky person or persons that will lease the company? I BET IT IS NOT CAYMANIANS.  We can only imagine. Our telephone companys  the the money transfer companys now our water company. What time will they put their flag down in CAYMAN. Three more years of this, the repair to the damages in that time will not be possible. We had something good going for so long and a bunch of irresponsible greedy few are destroying it. Hope your children and grand children pay for it.

       

       

       

       

       

       

       

       

  4. Anonymous says:

    THERE IS SOME THING FUNNY about this. why is it that the minister for the water authority has not said one word about this move. is it that she is afraid that the brackers will jump on her.  why is it that a back bench member has to tell the publ;ic about this. if this lease goes through god have mercy on us paying water bills in these trying times

    • Anonymous says:

      The Minister for the Water Authority has not said anything because, neither she, nor any other Minister, is allowed to speak. All pronouncements must emanate from Maximo Bushy, although he sometimes uses the lips of the Esteemed and Learned Junior Minister from West Bay for his utterances.

    • Anonymous says:

      With all the XXXX that julie is doing the Brac people should ask for their own Government and keep her up there. But I also understand that they too are fed up with her and just praying for the next three years to pass fast. Mack you are going to let this barefooted girl let you loose, try and control her. Dont think for one minute that you need her as she is just as unpopular as she can be. She only does what benefits her.

  5. Anonymous says:

    You do realize that we are paying for this regardless of its ownership status? We can pay the true cost to private investors or taxes to Government.

    The authority has not made a contribution to Government in ten years, it continues to require borrowings to fund it’s capital cost, the staff are over paid like most Civil Servants. I support this move and hope the Government divest of other Government owned and operated companies as well.

    This is the best approach to downsizing Government.

    • Anonymous says:

      The Water Authority gives central govt. some $2-3m per annum in returns.

  6. Adam Smith says:

    With a properly structured agreement, this will promote efficiencies in the utility supply and the one thing that CIG can’t do itself if operate efficiently.  Let us hope that there will be some technology investment and a sharp reduction in the work force.

  7. Anonymous says:

    I don’t know that they can even enter this deal in this way legally, the law requires Government contracts over CI$250,000 to be publicly tendered and assessed by the CTC. How can they receive an "unsolicited" bid and jump into a deal without offering it publicly and testing to see if this is in fact the best offer they could get? Opposition, you should be all over this

    • Grandma's Wisdom says:

      They might send the Opposition away like they did Dan Duguay when he questioned the new pier contract being given to Dart without going through the CTC.

  8. Roger Beswick says:

    Leasing Water Authority to Consolidated Water we are going to create a monopoly. This company currently produces water and sells to Water Authority.  If the governmet leases Water Authority we create an absolute monopoly. Absolute monopolies are very bad for the consumers and ultimately they will pay a big price in such situations.  In USA and Europe there are laws to prevent these situations.  Chris Johnson is not telling us about that.  There are greedy people in this country who would do any thing to make an extra buck.

    XXXX Also, Water Authority makes nearly $10 million in net profits annually. The Government can demand an annual dividend of at least $7 million as the sole shareholder. So why are we trying to hand over precious peoples’ assets to private individuals???.

    Also, Consolidated Water is not going to spend its own money for capital works/improvements which lasts for 20-30 years. If they spend, they are going to charge them back to the people by way of jacking up prices for water.  Who is going to protect people. Can the people trust Utilities Regulatory Commission which is appointed by XXXX politicians??? Right now they are sleeping !!!

    It is widely accepted that Utilitiy companies manupulate its billing system to overcharge consumers.  XXXXX

    Also, interested parties/ principal shareholders/ directors can rip off these companies.  This is how it happens. A Consulting company is set up in a lightly regulated jurisdiction – Bahamas, St Lucia etc. by those individuals and then bill the local company for exobitant fees for providing consulting services/ technical services.  Millions of fees are taken out from the companies and sent out of the country. Corporate lawyers know how to draft these service agreements so that no one would have any doubts about them. Those expenses are then shown as genuine business expenses by the local utility company and even their auditors are okay with these expenses. XXXX

     All Caymanians -except West Bayers should raise strong objections against this move. If you want to pay higher water rates like West Bayers, you do not have to worry about this. The opposition should protect the consumers.

  9. Anonymous says:

    Would this not create another monopoly for all intents and purposes, if it is the same company as Cayman Water? Then what would stop the rates being increased for such a profit driven enterprise?

    What about the jobs that would be lost, and where would they be employed with the economy in such a state?  Does the Government have a proposal for a safety net for such employees in such an eventuality, such as the infamous "dole" in the UK?

    Let us be careful that we are not creating a failed state by some of these decisions. Surely the welfare of the local people is paramount over and beyond such a profit driven enterprise?

  10. Anonymous says:

    Would the leasing company be monitored so as not to jack up the rates on us?

  11. Grandma's Wisdom says:

    Mac will lease the Water Authority assets. The lessee will then be allowed to raise rates about 20% within the first year, and regularly thereafter until we are all "underwater". Of course Mac and his minions will coach the  "UDP sheeple" receiving the high bills into directing their anger at the lessee.

    If you want a good example of how this works in practice then just look at the anger directed towards CUC after Big Mac increased the duty on diesel which CUC was then obliged to pass on to their customers.

    Undoubtedly, with Ju Ju as the Minister responsible for the Water Authority, any increase in rates will not apply to Cayman Brac customers.

    • Anonymous says:

      Stop this madness please.

      Solution = Stop the Cayman Brac Exhorbitant Shelter for $9,000,000

      BTW who is advising Ju Ju ? Is it still the same person who has been around in the same job for over 25years with still no successor and is an expert on everything?

      when will new blood and talent give proper policy advice.

      • Anonymous says:

        The hurricane hilton in Cayman Brac is but another example of a person who is lacking in ideas on how to improve that island’s economy. This type of project will have not lasting positive economic effect. This woman has had her chances and should just retire

  12. Anonymous says:

    Come on this is another reason for us the people to revert back to a tried and true method. BUILD A CISTERN!

    Simple we have one and we only pay $48 a month for drinking water that is delivered to our door.

    We also have a gas stove which cuts out some of CUC cost…so start thinking of ways to cut these thieves out of your lives today. Don’t get mad, get even!

    • Grandma's Wisdom says:

      You should look into getting an account with the Water Authority. My average bill is about $48 per month and I drink it (delicious), bathe in it (very soft), and use it for whatever else I please. I also saved the capital cost for a cistern estimated at $1 per gallon when I built my house back in 1990.

      • Chris Johnson says:

        Hate to break the news but had you built the cistern you would have saved money and had better tasting water.

        • Anonymous says:

          Is this someone pretending to be Chris Johnson the accountant?

          A 30,000 gallon cistern would have cost $30,000 back in 1990. A water bill of $50 per month for twenty years is only $12,000 total.

          Ignoring the maintenance costs on a cistern for the moment, I prefer the Water Authority "taste" because I believe they have people monitoring the quality of the water. Some may prefer the taste of cistern water, but I don’t want to risk drinking the unknown chemicals that MRCU have been spraying on my roof for the last 20 years.

          • Annonymous says:

            I agree with Chris Johnson. You obviously forgot that it rains  more than once a year and hence one would not build a cistern for 30,000 gallons.Daaaaaaaaaa.

            • Anonymous says:

              I’m sure you agree with a lot of people, it saves you from having to think for yourself. The math works just as well for 15,000 gallons if you care to try it.

              Last year we had only received 7.67 inches of rain through August 25th.

              http://www.caycompass.com/cgi-bin/CFPnews.cgi?ID=10385031

              This year I recall no significant rain falling before the end of May. However, you still fail to address the health concerns some may have from drinking chemicals sprayed onto your roof by MRCU or the blackened soot that builds up on the roof of those living near the flight path into and out of Owen Roberts Airport.

              • Annonymous says:

                The feasibility clearly depends upon the volume that is used by the household. this fact seems to have been overlooked. Those with large families,assuming they do take showers and not share them will use a lot more water as will those with large gardens or even swimming pools.

                As to mosquito spray I have not heard of many complaints from those that still use their cisterns, particularly our friends in the Eastern and Northside districts.

                By the way there are many cisterns that are less than 15,000 gallons.

  13. Anonymous says:

    Cline Glidden and the rest of you wake up!!!!  Why do you want to lease this now???  I think you will be creating more problems for Caymanians. Find some other way to make your money.  Buy out some of these ‘closed down’ hotels, convert  them into office space and board rooms and rent them out to clients, charging a good price per hour. Wish I had the money to buy one!

  14. Anonymous says:

    I shall do the wise thing and reserve my opinion of the deal until I am acquainted with the terms and the cash flows involved. This could be one of the rare times when government makes a financially prudent move. That would be amazing!

  15. Arden Parsons says:

    It is with great concern that I read that the Government may be selling/leasing back our Water Authority.  As a former member of the CPA we relied on guidance and input from the Water Authority for planning applications.  I thought most of their comments considered the environmental impact-ground water and fresh water lense- that projects would have and whenever we had meetings that they attended I thought they put the welfare of the Islands ahead of profit.  Is this possible with private enterprise?  Shareholders return usually drives private enterprise and the supposed suitor just had a terrible quarter according to the quarterly statements that were recently published.  Will the Water Authority management-"pro environment"- be replaced by the suitors manangement team-For Profit? If this was a money losing business would the Government consider selling it?  Does this sale/lease of the Water Authority include the sewerage and waste water part of the business?  Does the sale/lease terms include the terms of expanding sewerage through out Grand Cayman?  No sensible person sells their profitable sections of their business to retain only the unprofitable ones.  What makes this business deal so questionable is that we are being treated like mushrooms- kept in the dark and covered with bull—-!

    • Chris Johnson says:

      Can someone please explain to me as to why the Cayman Islands Government is in the water business? They are not in the telephone business nor the electricity business. In addition we all know that businesses run by commercial entities are always more profitable than ones run by Governments. The Boatswains Beach disaster is a fine example with Cayman Airways not too far short. Cut out sentimentality and sell the Water Authority. Do the US or the UK Governments or even Caribbean Governments own utility companies? I think not.That is why Consolidated Water is in the BVI, the Turks and Belize. I rest my case.

      I do agree with the previous poster about mushrooms but that applies to so many Government projects like the new hospital project which in the opinion of the writer in a pipedream.

      • Anonymous says:

        I agree with Chris in that government should not be in the water business, but he and I both know why they are. There was a need for piped water outside of the Seven Mile Beach area, but no private enterprise saw the value in, or was not prepared to take the risk of, developing a system of piped water back in 1984. It was government who took the losses in the early years to develop and eventually extend the infrastructure throughout the island, and to Cayman Brac where more than likely it is still not profitable.

        This is now an extremely valuable asset, and the people of the Cayman Islands deserve to get the best possible return for this investment. However, if we look at the track record of politicians in power becoming increasing rich while playing fast and loose with government assets, then I don’t want to see a fire sale of the Water Authority assets just so Big Mac can go to London and say "we no longer need your permission to borrow money".

         

         

        • Arden Parsons says:

          Great Discussion…..Isn’t it better to borrow money and pay it back with the profits from the Water Authority than to sell your assets to raise funds?  If pass experience and track records counts then I’m sure the money derived from the sale of this asset will not last long.  What do we do then?  Maybe we should sell the Public Beach as that is the only other valuable asset that I can think of!  Or maybe we can try an IPO for Cayman Airways and the Turtle Farm? 

      • Anonymous says:

        It is simple, Government should be in control of all major utilities.

        It is a mistake for any nation to have outsiders control your infrastructure, and dictate your destiny. We are not a developed country like the USA plain and simple.

        Theyshould also have a stake in CUC and the telephone companies.

        Take a lesson from Trinidad who is the major economic superpower in the region. They ensure that 51% of a utility is held by the people.

      • Anonymous says:

        With all due respect, I dont think that we want to follow after countries that are in much less  standing than we are or at least was. Some of these places that you mentioned are very primitive.

        • Annonymous says:

          Do the US, UK, or Canada own their utility companies? I think not.

          Lets get out of the water business, please.

  16. The Accountant says:

    Hopefully this helps cut through the clutter:

    This is a classic "sale-leaseback" transaction, whereby a lump sum is received currently (by the government), in exchange for the government having to pay annual lease payments over a specified period. 

    A sale-leaseback is economically equivalent to obtaining a loan and using the existing asset (or business, in this case) as collateral.   Either way, you receive cash now in exchange for having to make annual payments over the contracted term. 

    A sale-leaseback is only attractive (versus a conventional loan) if the implicit interest rate in the sale-leaseback is less than one can obtain from obtaining a loan.   This may be the case here as Consolidated Water may have strategic and/or synergistic reasons for wanting to buy a similar company, and therefore be willing to pay a premium for the business, hence making the implicit ‘borrowing’ rate embedded in the transaction less than they can obtain from an external loan, typically from a bank.   There may also be efficiencies and economies of scale that can be realized by consolidating the operations of these two entities, favorably affecting both the purchaser and the customer.   Be aware, however, that "efficiencies" may involve reducing duplicate staff in the merged organization. 

    A sale-leaseback boils down to a financing transaction, and is worth considering only if the ‘price is right’.  

    BUT CAUTION….we are dealing with elected officials (and this applies anywhere, not just here)…..the danger is that the government can take the proceeds of the transaction, and spend the proceeds currently (and by spending, providing the optics of benefiting their constituency on a short term basis — projects, jobs etc).  But in exchange for taking the up-front proceeds, the government is agreeing to make annual lease payments for the distant future.   It would be like a homeowner selling his fully-owned, no-mortgage home to his neighbor and agreeing to rent it back………….and spending all the proceeds in the current year………and not reserving the cash for the future annual rental liability.   

    Be very careful……..this IS borrowing.  Nothing else.  At least with a loan, the loan will be on balance sheet (ie, the full amount will be set up as a liability).  The lease may be what is termed an "operating lease", with the lease commitment not showing up on the balance sheet, just the the notes to the government’s financial statements.  

    • ex-pat eric says:

      Bear in mind as well that the government needs permission to borrow from the UK, which they probably won’t receive. So that is an added benefit of this type of transaction.

      My suspicion though is that the money is already spent and they are trying to find a way to get cash to spend.

      • O'Really says:

        I’m not sure I would describe a mechanism which allows government to by-pass debt ratios they themselves established under the PMFL as an added benefit, but I do agree with your last comment. In fact this smacks a little of desperation and makes me wonder just how bad things really are.

    • NorthSideSue says:

      I agree.  This is not free money, this is a loan.

  17. Anonymous says:

    Result:   Less quality, higher price, more unemployed caymanians, more cheap foreign labor, more profit for ONE person.

    What a disgusting country this is.

    • Anonymous says:

      How could it be profit for one person when CWCO is a publicly traded company? If you would like to share in the profits all you have to do is buy shares.

      • Grandma's Wisdom says:

        I doubt that the poster was referring to the potential lessee as the "one person" to profit handsomely from this deal. History is on the side of that poster as well.

    • Anonymous says:

      The country is not "disgusting", the politics is beyond disgusting. The blame must be placed squarely on the shoulders of the voters for we have elected our leaders. And we have the power to change things if we have the collective will to do so.

    • Anonymous says:

      &, you forgot, more washing! That is what water is good for, laundering dirt! That is what our Water Authority will be used for.

      • Anonymous says:

        do you mean money-laundering? We all know who is involved & rumoured to be interested in buying the water authority! OMG! say it ain’t so!

  18. Anonymous says:

    Water. The perfect consumer product to put in the hands of a virtual private monopoly.  Anyone who does not buy and consume the product in some form for three days dies.  And if this private enterprise fails?  Will the Government tell the Cayman people "Welcome to the harsh realities of the market" while our faucets run dry? 

    • Anonymous says:

      I take your point, but on a point of fact you will not die if you don’t consume water for three days. I once did a complete fast for 3 days and didn’t die.   

  19. Anonymous says:

    I dont give a d@mn what them clowns want to do!   Cause as long as it rains I will get to take a shower.  Ya’ll better build a cement water tank, buy one of the plastic ones, or pull out your buckets.  We ga need um!

  20. Chris Johnson says:

    Government should not be in any business. They are elected to govern the country. Thus the Water Authority  and similar assets such as Boatswain’s Beach, Garbage collection and Cayman Airways should be sold outright. Of course there is a considerable advantage in Consolidated Water buying the Water Authority because of the economies of scale. It is possible that the cost of water to the public could be reduced although that is unlikely.

    • Anonymous says:

      Apparently Chris Johnson isn’t familiar with the public to private debacle known as British Rail, the days of unbridled greed which lead to 20,000 square foot mansions are over. There is great social utility in the Water Authority remaining as is.

      • Chris Johnson says:

        Thank you anonimouse for the post at 20,2 whoever you are.I fail to understand your post because Cayman has no rail system. Please elaborate. Should you be such a great believer in the Water Authority no doubt you would suggest they purchased Consolidated Water and get the country into further debt. Not a smart move.

      • Lachlan MacTavish says:

         20:23…..not a good comparison. CJ is correct, Governments should not be in business, they should govern the country and not open doors for the elected members to make dosh.

         

        • Tami says:

          I am all for private business, but when private entities end up jacking-up cost and makingthings more expensive for ordinary Caymanians, and starting doing as they please to the economic pie with no regard to others who have little.

          THEN… I am for the little man, and do endorse government regulations and laws protecting the citizen’s interest. Don’t you agree?

          • Lachlan MacTavish says:

             Unfortunately most Government run businesses are not better for the local consumer. The Gov has no incentive to be competitive. They get paid no matta wha. The businesses bloat and have large benefit packages. I predict that the water company will actually end up less expensive for Caymanians. 

            • Anonymous says:

              Then perhaps you can explain why Cayman Water Company rates are approximately 20% higher than Water Authority rates, given that all of their customers are clustered into a narrow strip less than seven miles long, while Water Authority customers are stretched over the rocky remainder of the island?

              Perhaps the answer to that question, as well as why they have made an unsolicited offer for the Water Authority assets, can be found by reading between the lines of this Form 8-K filed with the US Securities and Exchange Commission.

              http://www.sec.gov/Archives/edgar/data/928340/000114420410039056/v191246_8-k.htm

               

  21. Rafaelle says:

    Thats the end of that, Water prices skyrocket and the deal makers GP get paid. Caymanians start looking for other alternatives.Why the grand secret and  leased to who? So we can determine if its good thing. These folks were elected by us yet we appear not to be trusted by them.

  22. Anonymous says:

    So we are going to lease Water Authority to Consolidated Water? This does not sound good!  Last I heard how they layed off Caymanians during this economic downturn and brought foreignors here, providing them with cars and apartments.

    I think money is blinding the eyes of UDP members again!  We need to look out for our own Caymanian people. I am wary about making deals to lease valuable assetsat a time like this, and the promise that the socall monies would come back to helping "we" the people!

    All I got to say, the offers better be good with no strings attached.

  23. Anonymous says:

    Leave it to McKeeva and his senseless clowns to come up with such a grand plan…..lease out one of the only assets government has that is not a drain on them and actually makes a profit! Talk about a lot of common sense and creative thinking going on behind those cabinet doors! I’ve had enough of these XXXXX!!

    • Anonymous says:

      All Caymanians like to do is talk. THEY DONT HAVE NO BACKBONE. If this was in the Brac it could not happen. Come on our only hope MR ARDEN head up a march on this for us.