COMMONWEALTH OF THE BAHAMAS

 COMMUNICATION TO THE HOUSE OF ASSEMBLY

BY

HON. BRADLEY B. ROBERTS, MP

MINISTER OF WORKS & UTILITIES

WATER & SEWERAGE CORPORATION

AUDITED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2005

 (DECEMBER 13, 2006)

 NASSAU BAHAMAS

Mr. Speaker, I am pleased to have laid on the table a few moments ago, audited financial statements of the Water and Sewerage Corporation for the fiscal year ended December 31, 2005.  I wish to draw to the attention of this Honorable House the following salient details:

§ That the Operating Revenue for the year was $37,373,862 versus $35,035,742 for the previous year, an increase of $2,338,120.  New Providence experienced modest growth of $1,183,910.  Family Islands generally experienced strong growth, but the largest single factor in the overall $1,154,174 increased Family Island revenues was the newly-acquired Treasure Cay operations in Abaco.

§ Operating Expenses for 2005 totaled $46,605,272 compared to $37,140,233 in 2004.  Mr. Speaker, in order to make a meaningful comparison, I must hark back to one of two non-recurrent transactions that had a positive impact on 2004 Statement of Operations.   Notably, actuarial changes in estimate of the Corporation’s pension costs that resulted in nearly $4,494,514 savings.  Of course this unusual transaction in 2004 distorts any direct comparison to staffing expenses in 2005. 

§ Apart from this, cost increases were most notably related to activities that improved customer service delivery such as reverse osmosis water purchases that increase by $2,529,404 and water importation costs.  The latter includes charter hire for an additional vessel during the difficult winter months of 2005, and increased fuel costs associated in major part with operating the water vessels, that together accounted for increases of $2,656,805.

§ Another significant 2005 expense is provision for doubtful debts that increased by $1,165,225. The Corporation is preparing to launch a major campaign to win back customers through improved water quality and quantity. However, it recognizes that in order to give all deserving citizens a chance to enjoy these services, it will have to write-off charges previously billed to disenchanted customers who have received poor or no service in the past.

§ The second non-recurrent transaction in 2004 related to other income (note 13):  Mr. Speaker, there were no significant other incomes in the 2005 Statement of Operations, as compared to 2004 when the Corporation recognized an unusual gain of $4,076,765 from interest reduction on two loans from National Insurance Board.  These loans were paid off during 2005 by a Government bond issuance.

§ The Government subsidy for the year was $15,500,000 versus $12,040,000 for the previous year, an increase of $3,460,000.  This demonstrates both the Government’s commitment to the growth and strengthening of the Water & Sewerage Corporation, and the need to underwrite the cost of providing improved services in certain Family Island communities that now increasingly depend on high quality reverse osmosis water instead of poor quality groundwater.

§ Mr. Speaker, the net loss for the Water and Sewerage Corporation, for the year ended December 31 2005, totaled $3,107,671 in comparison to a net income of $7,843,694 in the previous year.  Again, I must stress that this 2004 net income was due to unusual non-recurrent factors and remind this Honorable House that in presenting the 2004 financial statements last year, I cautioned Hon. Members not to be misled that the Corporation is on a sound financial footing; and that in fact nothing could be further from the truth.  I repeat that there are many challenges that face the Corporation but I am pleased to say that I can also sound a note of optimism about the Corporation’s financial future.

§ Mr. Speaker, I am pleased to advise that the Corporation under the astute guidance of its Board of Directors and Chairman Donald Demeritte has made several excellent decisions by advocating infrastructural upgrades and extensions that not only bring new or improved services to residential communities including Long Island, Central and South Eleuthera, Exuma and San Salvador, but also key anchor projects in various stages of development throughout the Bahamas, including Kerzner, South Ocean, Baha Mar, Albany House, and Cotton Bay in Eleuthera.  At the end of the day, I am confident that such visionary planning will reap benefits in terms of exponential revenue growth and market share. Furthermore, the Corporation is committed to completing all necessary formalities to revalue landholdings worth approximately $75 Million but currently recorded at only $4,000 on its books.  This will considerably strengthen the Corporation’s balance sheet and allow the financial leveraging necessary to secure much needed capital funding for the Corporation. 

§ I take this opportunity to express the Government’s thanks and gratitude to the Board of Directors, Executive Management and Staff of the Corporation for their contribution during fiscal year 2005.