Water company still in negotiations for new franchise

(CNS): Consolidated Water, the privatefirm which supplies customers in the West Bay area, has reported a fall in sales in Cayman in its first quarter operating results. The firm, which operates in several other jurisdictions around the world, said that for the three months ended 31 March 2011 total revenues were around $13.9 million, compared with about $14.7 million in the first quarter of 2010. CEO Rick McTaggart also revealed that the firm had not yet come to an agreement with the Cayman government over the company’s new franchise agreement but had gained a temporary two month extension of its license.

He said that Consolidated was notified by government last week that it had extended its existing retail water franchise until 4 July this year in order to facilitate the completion of negotiations for a new franchise agreement in Grand Cayman. “This process has been more complicated, and is taking longer, than initially anticipated, but we remain optimistic that a satisfactory conclusion to the negotiations will eventually be forthcoming," the water boss said.

In its announcement the firm stated that retail water revenues of roughly $6.4 million during the most recent quarter the same as the prior year’s first quarter.

“The total volume of water sold through the Company's retail water operations in the Cayman Islands decreased by 16% when compared with the first quarter of 2010,” Consolidated said in a release. “However, all of the decrease represented water sold to Water Authority – Cayman in 2010 in order to meet WAC's needs while its Red Gate plant was under refurbishment.”

The volume of water sold by the company to its normal retail customers varied by less than one percent, the firm revealed. It also said that revenue loss relating to WAC in 2010 was offset by a 2.3 percent inflation-related adjustment to base rates because of the increase in the consumer price indices used to determine rate adjustments. Consolidated also pointed out that higher energy costs from increases in fuel and electricity prices were passed on to retail customers.

Consolidated gross profit decreased four percent to approximately $5.3 million in the three months compared with approximately $5.5 million in the first quarter of 2010, the firm said, adding that profit on retail revenues was relatively consistent with the prior-year period at $3,492,639 versus $3,531,821. Profit on bulk revenues increased to $1,564,472 from $1,360,579.

"Revenues and gross profit generated by our retail franchise operation remained consistent with the same period last year in spite of reduced sales volumes, reflecting a modest inflation-related base rate adjustment in January as well as higher energy pass-through charges,” said McTaggart.

“While government air and cruise ship arrival data clearly show more tourist visitors to Grand Cayman during the first quarter of this year when compared to 2010, this activity has yet to translate into higher retail sales volumes. The profitability of our services business segment continued to be adversely affected by a lull in new project activity during the first quarter of 2011," he added.