By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government has little choice but to bail-out a Water & Sewerage Corporation that is "hanging on a very tight string"," a Cabinet minister confirmed yesterday.

Desmond Bannister, minister of works, told Tribune Business that the state-owned water utility is facing "tremendous challenges" due to the growing number of customers unable to pay their bills due to COVID-19 related job and income losses.

With the pandemic worsening the problems created by the Corporation's below-cost tariff rates and Hurricane Dorian, which inflicted millions of dollars in repair costs as well as wiping out virtually its entire Abaco customer base, Mr Bannister said the financial position was becoming increasingly unsustainable with "tremendous amounts of money" now owing to suppliers, contractors and service providers.

Praising the Corporation's executive chairman, Adrian Gibson, and general manager, Elwood Donaldson, for "just keeping things going", Mr Bannister said the utility was "very reluctant" to disconnect any delinquent customers given water's importance in fighting the COVID-19 pandemic.

However, he added that both the Corporation and the Government were reluctant to implement this as a wide-ranging policy because it would encourage persons such as those can pay but will not to "abuse" the situation.

"The Water & Sewerage Corporation is hanging on a very tight string," Mr Bannister told Tribune Business. "They're tremendously challenged. They have huge challenges. Many people are not paying their bills, and as a result of that they don't have the revenue they need to be able to do what they have to do.

"There are many reverse osmosis suppliers who are owed millions of dollars by the Corporation. There are suppliers all over that the Corporation owes tremendous amounts of money."

An insight into the Water & Sewerage Corporation's financial challenges, and the increasing burden this will inflict on the Bahamian taxpayer, was provided earlier this week when its main water supplier, BISX-listed Consolidated Water, revealed that the Government had paid $4m in July to reduce the utility's debt to it to $17.8m.

Mr Bannister yesterday said COVID-19's economic fall-out had exacerbated the problems posed by the Water & Sewerage Corporation's already-inadequate revenue streams due to the fact it is selling water at a price below the cost it takes to produce it and buy it from various reverse osmosis suppliers.

"They don't have debts to the level of Bahamas Power & Light (BPL)," the minister added, "but when you put that perspective they still have huge debts relative to the size of the Corporation. It cannot be sustained. The Government is going to have to assist.

"We are consuming a product that many of us are reluctant to pay for. When you have a situation like this [pandemic], the Corporation cannot keep disconnecting people. People have to have water to survive.

"When we're in the middle of a pandemic the Corporation is very reluctant to disconnect anyone. I don't want to say this is a policy because there are many people who will abuse it. But when it comes to circumstances where people legitimately cannot pay their bills, we understand that. That's our job as part of the social construct."

Mr Bannister suggested the absence of direct taxation meant many Bahamians did not equate subsidies to state-owned Corporations with the fact that they were often paying for those who did not pay their bills.

While he had not seen the Water & Sewerage Corporation's latest financial figures, Mr Gibson's June Budget presentation in the House of Assembly had set out the extent and speed of its descent.

He said then that between 60 percent to 70 percent of Water and Sewerage Corporation customers will not be able to pay their bills in the next six months.

“COVID-19 has had a devastating blow to the Water and Sewerage Corporation’s cash flow which, quite honestly, was already in a downward spiral due to the impact of Hurricane Dorian and the loss of our second largest revenue base (Abaco),” Mr Gibson said.

“Year-to-date, cash collections has decreased from $29.8m in June 2019 to $22.5m in 2020. This represents a 25 percent decrease." The executive chairman also noted that the Water and Sewerage Corporation’s revenue loss stood at $3.8m per month as a result of their policy position to not disconnect water from customers amid the COVID-19 pandemic.

“It is anticipated that 60 percent to 70 percent of WSC customers (due to the increase in the unemployment rate) will not pay their water bill. This will amount to $2.28m to $2.66m per month or $11.4m over the next six months,” Mr Gibson added.

In the meantime, the Water & Sewerage Corporation’s debt to its main BISX-listed supplier hit almost $20m at the 2020 mid-point as its customers found it increasingly difficult to pay their bills.

Consolidated Water, in last Friday’s 10-Q filing with the US Securities and Exchange Commission (SEC), revealed that Bahamian taxpayers are being relied upon ever-more to fill the financial gaps left by the corporation and its customers as the sum owed to it was cut by some $2.1m during July.

The owner/operator of New Providence’s Blue Hills and Windsor reverse osmosis plants also disclosed that nearly 80 percent of the debt - or four out of every five dollars owed to it for supplying the Water & Sewerage Corporation and its customers - is delinquent, meaning it is more than 90 days past due.

“Consolidated Water (Bahamas) accounts receivable balances due from the Water and Sewerage Corporation of The Bahamas amounted to $19.9m as of June 30, 2020 and $18.4m as of December 31, 2019,” Consolidated Water said in its SEC filing.

“Approximately 79 percent of the June 30, 2020, accounts receivable balance was delinquent as of that date. The delay in collecting these accounts receivable has adversely impacted the liquidity of this subsidiary. As of July 31, 2020, Consolidated Water (Bahamas) accounts receivable from the Water and Sewerage Corporation totalled approximately $17.8m.”

That indicates that the Bahamian taxpayer, via the government, has again been active in cutting the Water and Sewerage Corporation’s receivables balance to a more manageable level. And Consolidated Water acknowledged that the Public Treasury has always come through to pay what is owed by its sole client, enabling it to avoid taking provisions for doubtful accounts.

However, at $19.9m, the Water and Sewerage Corporation’s debts to its main supplier are as high as they have ever been due to COVID-19’s impact on its own customers’ ability to pay their bills as well as the loss of its second highest-producing island, Abaco, to Hurricane Dorian.