Ocean Conversion (Cayman Ltd.) has reached a new five-year agreement with the Water Authority, Cayman to operate reverse osmosis seawater conversion plants in North Sound and Red Gate. The plants are owned by the Water Authority, but were built by Ocean Conversion and have been operated by the company.
The new deal will commence on Feb. 1, and will have Ocean Conversion supplying water at a 31-percent discount from the price in effect as of Dec. 31, 2017, according to an Aug. 24 U.S. Securities Exchange Commission filing from Ocean Conversion’s parent company, Consolidated Water. Water Authority officials did not respond to media inquiries about whether the new deal will result in lower prices for customers.
Ocean Conversion earned a combined $7.2 million in revenue from these water plants and another in North Side in 2017, states the report from Consolidated Water, which also sells water to residents in the West Bay and Seven Mile Beach areas.
Ocean Conversion’s contract to operate water plants in North Sound and Red Gate expired last month, but the company agreed with the Water Authority to continue to run them through February while the Water Authority reviewed bids for a new operating agreement.
The Water Authority reviewed bids from eight companies, and on Aug. 21 it accepted Ocean Conversion’s bid for the new agreement.
Besides the 31-percent price reduction, the SEC filing states that the remaining terms of the new agreement are substantially consistent with those of the prior North Sound and Red Gate water supply agreements – except that under the new agreement, the Water Authority will pay the energy costs for the operation of these plants directly to the Caribbean Utilities Company rather than reimbursing the company for these costs.
Part of the negotiations also entailed the Water Authority paying for Ocean Conversion to make some US$138,000 in plant repairs to membranes that have been deemed a “safety hazard,” according to Water Authority board meeting minutes.
According to the minutes, the high-pressure membranes are at the end of their useful life and are considered a safety hazard.
“Some time ago, one of these vessels ruptured suddenly without prior warning and it is expected that others may follow,” the Water Authority minutes from May state. “The Engineering Services Department recommends that the high-pressure membrane vessels that are at the end of their useful life be replaced.”
Ocean Conversion reportedly offered to replace the aging parts for US$138,000, and Water Authority board members had no objection to the authority proceeding with the replacements.
Meanwhile, negotiations have dragged on with another Consolidated Water subsidiary, Cayman Water, and the Utility Regulation and Competition Office over the company’s license to provide water to the West Bay and Seven Mile Beach areas.
The retail license was originally set to expire in July 2010, but has been extended several times over the years so that government and the company could reach a new deal.
Consolidated Water states in its financial reports that government is looking to restructure its water-supply deal with Cayman Water in a manner that could significantly reduce the company’s income.
OfReg’s 2017 annual report states that the regulator expects to finalize negotiations by the end of this year.
Editor’s note: This story has been updated to reflect the plants Ocean Conversion will operate under its new agreement with the Water Authority.