Consolidated Water increased total revenues during the second quarter of 2012 by 9 per cent to approximately $16.2 million, compared with approximately $14.8 million in the second quarter of 2011. Consolidated’s gross profit rose 3 per cent to approximately $5.4 million or 33 per cent of total revenues compared with approximately $5.3 million or 35 per cent of total revenues in the prior-year period.
Retail water revenues declined 10 per cent to approximately $5.9 million. This constitutes about 36 per cent of total revenues. The water company blamed unusually high rainfall in Grand Cayman for the 17 per cent decrease in the number of gallons sold. Bulk water revenues, meanwhile, increased 31 per cent to approximately $10.2 million, about 63 per cent of total revenues.
“Our second quarter results for this year were adversely impacted by very unusual weather with an extra 2 feet of rain falling on Grand Cayman Island when compared with the second quarter of last year,” said Rick McTaggart, chief executive officer of Consolidated Water. “However, despite abnormally high rainfall amounts on Grand Cayman Island during the three months ended 30 June, 2012, that greatly reduced our retail segment’s revenues, we were able to generate operating and net income amounts for the current quarter consistent with those of the prior-year period due to the performance of our bulk segment, which increased its revenues by 31 per cent from last year’s second quarter,” he said.
The bulk segment revenues are derived from long-term “take or pay” contracts that are not affected by weather patterns, he said.
“From a longer-term perspective, our bulk segment has grown rapidly during the past five and a half years, with bulk water revenues approximately doubling from $18.3 million in 2006 to $36.1 million in the twelve months ended 30 June, 2012. Assuming that rainfall patterns return to more normal levels in Grand Cayman during the balance of this year, our retail segment’s revenues and contribution to overall earnings for the second half of 2012 should also return to historical levels.”
Mr. McTaggart also confirmed that on 3 August Consolidated Water received an extension of its exclusive Cayman retail licence for the areas of West Bay and parts of Seven Mile Beach in Grand Cayman until the end of this year. The company has been in negotiations with the government over a licence for the past two years.
In July, the water utility had filed an application for leave to apply for judicial review with the Grand Court of the Cayman Islands on the basis of three specific issues relating to the water licence negotiations.
The company said certain provisions of The Water Authority Law, 2011 and The Water (Production and Supply) Law, 2011, “appear to be incompatible”, that the role of the Water Authority as the principal license negotiator, statutory regulator and competitor to Consolidated Water put the Water Authority in a position of “hopeless conflict” and that the Water Authority’s decision to replace the rate structure governed by the current exclusive license with a rate of return on invested capital model was “pre-determined and unreasonable”.
“Throughout the course of the retail license renewal negotiations, we have objected to the use of a [rate of return on invested capital model] on the basis that such a model would not promote the efficient operation of our water utility and could therefore ultimately result in an increase in water rates to our customers,” Mr. McTaggart said.