NWC hiring consultant for asset review
Published:Sunday | April 17, 2022 | 12:05 AM
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The National Water Commission, NWC, plans to review the value of its assets ahead of submitting its tariff application during a period of rising energy costs. The water utility is in the process of recruiting a consultant to conduct the assessment...
The National Water Commission, NWC, plans to review the value of its assets ahead of submitting its tariff application during a period of rising energy costs.
The water utility is in the process of recruiting a consultant to conduct the assessment via competitive bidding.
“The depreciation study should clearly outline recommendations on the appropriateness and any necessary modifications to be made to the depreciation rates/useful lives of the NWC’s assets,” the request for proposal stated. Bids are due by May 18.
The state-owned water commission is seeking local or international firms to conduct a review of the historical and remaining useful life of its assets and to compare their regulatory useful life with the regulatory useful life of similar asset classes in use in comparable jurisdictions.
In recent months, the price tag to operate NWC’s assets has climbed alongside rising electricity costs. A senior manager at the water commission, who requested anonymity, to respect communication protocols, said NWC’s light bill jumped from around $700 million during the onset of the pandemic in 2020 to over $1 billion since the Russian invasion.
Efforts at comment through NWC’s official communications channel were unsuccessful.
The manager said the asset study will assess the viability of the enterprise, issues relating to the real cost of operation, and the capital required to run it. All of those things are directly or indirectly tied back to the asset base of the company, the person said.
“We did an asset study some years ago, and it would have to be updated,” the manager added. “In determining what the rate should be, they have to know the cost and viability of the operation. It is affected by the assets we have and how those assets are being deployed.”
NWC will apply for its tariff review this year, according to its regulator, the Office of Utilities Regulation. The regulator redirected requests for comment on the asset study back to the water utility.
The last tariff rates approved for NWC covered the period 2019-2021.
The value of NWC’s heavy equipment assets, or non-current assets, are now estimated at $73.3 billion but are projected to rise to $79 billion by the close of the fiscal year 2023, according to the Jamaica Public Bodies report published by the Ministry of Finance.
The utility’s current position continues to worsen, with negative working capital expected to grow from $6.7 billion in 2022 to $12 billion by the end of FY2023.
Its accumulated deficits are also projected to grow from $50 billion to over $52 billion due to expected losses in the year. Ultimately, after factoring capital injections, NWC’s negative equity will worsen from $12.2 billion in 2022 to $13.9 billion in the period.
The NWC plans to conduct a series of capital projects in the year including a non-revenue water or NRW for St Catherine to reduce the incidence of NRW consumption by half, from 21,000 cubic metres per day to 10,500 cubic metres; replacement of old water pipes on Spanish Town Road in Kingston; and heavy infrastructure works in Port Royal.
The NWC projects a deficit of $1.7 billion on revenue of $42.4 billion for year ending March 2023, a slightly better outcome than the $1.9 billion deficit and $39.4 billion of revenue estimated for FY2022.