Water Corp warns on disconnection restart

• No cut-off directive creates $9m arrears build-up

• Cash flows 'can't sustain payroll, vendor payments'

• Gov't agencies owe total $7.9m; not paid since March

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Water & Sewerage Corporation's executive chairman will today write to Cabinet ministers asking to restart delinquent customer disconnections as the utility grapples with "dire financial straits".

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Long Island MP Adrian Gibson.

Adrian Gibson told Tribune Business that the state-owned water supplier has little choice but to "recoup" some of the multi-million dollar sum it is owed given that current cash flows "cannot sustain monthly payments to vendors and [staff] payroll for the balance of 2020".

He revealed that the Corporation was "going back and forth" with the Ministry of Finance over reclaiming a "roughly $9m shortfall" in residential customer payments as a result of being directed to cease all disconnection activity since late March 2020 due to the COVID-19 pandemic.

With the Water & Sewerage Corporation facing a $30.8m "backlog" on payments due to vendors at end-August 2020, a sum that continues to grow, and a $15m-plus year-over-year decline in revenue for the year to-date, Mr Gibson said such "unprecedented challenges" required immediate action to place the entity on "a firmer footing".

Noting that other government ministries, agencies and departments currently owe the Corporation some $7.9m, with no payment made on this collective debt since March 2020 and COVID-19's arrival, he added that the Budget's cut to its annual subsidy and Hurricane Dorian's impact had further worsened the utility's woes.

"We're trying to position ourselves to be able to recoup funds, and tomorrow I will be sending correspondence to my colleagues in the Government, including minister Bannister [who has ultimate responsibility for Water & Sewerage] and my colleagues in finance and so on, with a view to the Corporation looking to commence disconnection exercises again," Mr Gibson disclosed.

"At the outset of COVID-19, we at the Water & Sewerage Corporation were directed not to disconnect residential customer accounts given that COVID-19 meant the maintenance of cleanliness and hygiene was paramount. This directive resulted in a shortfall of residential customer payments for the period March to September 2020 of roughly $9m."

However, should the Government give the go-ahead to resume disconnections, Mr Gibson reassured struggling non-payers that their water supply will not be cut-off overnight. "We recognise the need to be able to encourage customers to come in and make payments to their accounts," he said.

"While we need to be able to revisit disconnections, should we move to resume the same we would certainly want to give persons adequate notice so they can come in and make the requisite payments to get their accounts current. It will not be overnight. It will not be decide today and tomorrow we come. We will give persons an opportunity to pay."

Mr Gibson said the Ministry of Finance had pledged to cover the financial hole produced by the 'no disconnection' directive, which resulted in delinquent customers - including those who had lost jobs and/or income due to COVID-19 - not paying for services they continued to consume.

"We've been going back and forth with Finance with a view to restoring the outstanding funds and getting a payment," he added. "We're waiting for that to be addressed as it relates to refunding or reimbursing Water & Sewerage Corporation for the accumulated arrears since this directive for COVID was given."

The executive chairman, who is also MP for Long Island, signalled that the need to recover such funds was becoming more urgent by the day. "Frankly, the Water & Sewerage Corporation is in dire straits," he continued. "Our operating cash flow cannot sustain monthly payments for vendors and payroll.

"These challenges have resulted in a backlog of supplier payments that are steadily growing, and there's concern about monthly payroll for the balance of 2020. Our vendor payments backlog as at August 27, 2020, was some $30.8m."

Mr Gibson said this payable covered everything from monies owed to third-party contractors; vehicle and building insurance; and loans due to multilateral institutions such as the Inter-American Development Bank (IDB) and Caribbean Development Bank (CDB).

While the Ministry of Finance has assumed responsibility for repaying the former institution, the Water & Sewerage Corporation is charged with taking care of the interest and commitment fee on a multi-million dollar CDB loan that will soon come due for principal repayment.

"Additionally, we have government receivables of some $7.9m as at September 30, 2020," Mr Gibson said of debts owed by other public sector entities. "Our last payment on the Government side was in March; some $5m."

The Water & Sewerage Corporation's plight further exposes how state-owned enterprises (SOEs), which are already heavily loss-making, are threatening to become an ever-increasing burden for the Government and Bahamian taxpayers to subsidise at a time when the Public Treasury is struggling to pay its own bills.

The water provider thus joins Bahamasair as a second SOE to either warn of, or report, issues with meeting payroll as its income sources and revenues dry up. However, it is unclear whether the Water & Sewerage Corporation will be given permission to resume disconnections, as Bahamas Power & Light (BPL) has done, due to the potential social, economic and political fall-out.

In common with BPL, Water & Sewerage Corporation has been placed at a long-term disadvantage financially because it has been selling water to Bahamian consumers at prices below the cost of production. This has meant its revenue income has, for at least two decades, been insufficient to cover operating costs well before COVID-19 arrived.

Mr Gibson said the Water & Sewerage Corporation's financial position had been further weakened by the 2020-2021 Budget's cut to its annual subsidy, which was slashed from $25m in the prior year to $20m last year.

And Hurricane Dorian cost the utility its second-largest market, with customer collections for the year-to-date on Abaco down by 89 percent. For the period to end-September 2020 they stood at just $223,638 compared to $2.117m for the prior year.

Overall, the Water & Sewerage Corporation has experienced a $15.035m or 31 percent drop-off in total income/cash flow for the nine months to end-September 2020, with revenues standing at $33.724m compared to $48.759m for the same period in 2019.

This reflects the impact from both COVID-19 and Hurricane Dorian. Mr Gibson said the decline in customer collections had been far steeper in the Family Islands than New Providence, for while September saw an 11 percent overall "shortfall" compared to 2019, the slump outside the capital island had been by a much greater 33 percent.

And, while August produced a total collection of $2.2m compared to $3.3m in 2019, a drop of 32 percent, the executive chairman revealed that the Family Islands were off by 41 percent. As for July 2020, Mr Gibson said the Water & Sewerage Corporation's collections from customers were down by $4.7m year-over-year, standing at $3.3m as opposed to $8.1m, a 58 percent fall.