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Cayman water company pumps big profit

Friday, March 15, 2013

CAYMAN Islands-based Consolidated Water Company this week reported a 52 per cent year-on-year increase in net income to US$9.3 million in 2012.

The company develops and operates seawater desalination plants and water distribution systems in areas of the world where naturally occurring supplies of potable water are scarce or nonexistent. It operates in five countries across the region: Cayman, The Bahamas, Belize, Bermuda and The British Virgin Islands (BVI).

Consolidated Water's performance last year was driven by a 19 per cent increase in total revenues to US$65.5 million, catalysed by a 33 per cent jump in bulk water sales to to US$40.8 million. It attributed the growth in bulk water to the expansion of the company's Blue Hills plant in The Bahamas during the fourth quarter of 2011.

The firm produces and supplies water to end-users, including residential, commercial and government customers in the Cayman Islands under an exclusive retail licence. Retail water revenues increased four per cent to US$24.2 million, behind an increase in the company's base rates of approximately four per cent due to an upward movement in the consumer price indices used to determine annual base rate adjustments which become effective in the first quarter of each year. The company said this was partially offset by an approximate two per cent decrease in the number of gallons sold in 2012 due to abnormally high rainfall on Grand Cayman Island during the second quarter of 2012.

Services revenues declined to US$469,625 for the year ended December 31, 2012, due to the expiration of the management services contract for the Bermuda plant on June 30, 2011 and a reduction in plant sales revenues due to a lack of customer plant construction activity in 2012, the company said.

"Our primary business segments continued to perform well during 2012, with gross profits of the retail and bulk water segments improving in terms of total dollars, while gross profits as a percentage of segment revenues were relatively unchanged from prior-year levels," stated Consolidated Water's CEO Rick McTaggart.

"Retail gross profits increased by approximately US$800,000 when compared with 2011 levels, while bulk gross profits rose approximately US$2.4 million due to the 67 per cent expansion in production capacity at the Blue Hills plant in November 2011," he said in a press release.

McTaggart noted that the company's BVI affiliate collected approximately US$4.7 million from the BVI government during the fourth quarter of 2012 and another US$2 million in the first quarter of 2013, representing all outstanding amounts due under the 2009 court judgement with respect to water sold by OC-BVI from the Baughers Bay plant on the island of Tortola.

"Pursuant to the final June 2012 ruling of the appellate court, OC-BVI continues to pursue a further claim for the value of the Baughers Bay plant on the date it was turned over to the BVI Government in March 2010," he said.

What's more, during the fourth quarter of 2012, Consolidated Water moved forward on its proposed 100 million gallon per day desalination plant in Rosarito, Baja California, Mexico, added McTaggart.

"We are quite excited about the steady progress that has been achieved on this very important project, and we are targeting mid-2014 to begin construction of the plant," he said.

Consolidated Water Company was established in 1973 as a private water utility in Grand Cayman, the largest island in the Cayman Islands group, and obtained its first public utility licence in the Cayman Islands in 1979. The company was listed on the Nasdaq stock market in 1995.

Over the past 10 years, the company has grown from a small Cayman Islands-based utility business with revenues of less than US$10 million per year to a regional water provider with 2008 revenues in excess of US$65 million.

The company says it accomplished this growth by capitalising on its exclusive water utility franchise in Grand Cayman, as well as acquiring a number of other established businesses in the region and leveraging these acquisitions, using its technical expertise and regional knowledge, to obtain contract extensions and new projects.

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