Drought drains NWC's revenue
Published:Friday | June 4, 2010 | 12:00 AM
The state-owned monopoly piped water provider, National Water Commission (NWC), is accustomed to revenue shortfalls, a situation that has got from bad to worse. With net consumer receivables of more than $2.7 billion up to February, the utility company is now collecting anywhere between $100 million and $200 million less per month as result of simply not having enough of the sole commodity it sells, to go around. Over a 12-month period of the current drought condition, which began last year, the water agency could be staring at an additional $2.4-billion hole in its budget.
With the latest financial bind, NWC officials are fearful that the company's capacity to respond to a crisis, with the hurricane season looming, has been severely compromised.
"We are seriously concerned about the (possible) impact of the hurricane season," Charles Buchanan, the agency's corporate communications manager, has said.
"We are moving from one crisis to another," he told the Financial Gleaner this week.
"We may be called upon to fund a repair and restoration process, but, in the context of the reduction in revenue, there will be limits in what we are able to achieve," Buchanan said of the possible scenario of a major storm hitting the island in a season the United States-based National Oceanic and Atmospheric Administration is predicting will be an active one.
The cash-strapped central government is not ideally in a position to bailout the NWC, should its fortunes deteriorate further and, as Buchanan has pointed out, for several years now, the commission has been handling its recurrent and capital projects without help from the consolidated fund. External sources of financing for the agency have largely been confined to international organisations with the amounts forthcoming proving insufficient.
Heavy price
Last November, the commission floated a seven-year bond on the Jamaican market successfully rai-sing $900 million in a one-week private placement.
But the debt came at a heavy price, an initial 21.17 per cent on the first six-month coupon payment, a premium, then more than four percentage points above the prevailing benchmark six-month treasury bill rate.
Buchanan said the proceeds would be used to pay down some of the NWC's United Sates-dollar debt.
"The bond issue was for the retirement of portions of shorter term debt - liabilities (that are) attached to loans that financed repairs to the hurricane-damaged Yallahs Pipeline, which pulls water to the Mona Reservoir for distribution within Kingston, and that funded a portion of the Soapberry project, a triple-agency joint venture project that built a state-of-the-art sewage treatment facility serving parts of the capital as well as sections of Portmore," he said.
According to Buchanan, the Government, now currently operating under the constraints of the International Monetary Fund programme, is not likely to be inclined to issue new loan guarantees on behalf of the water agency.
There was clear knowledge that, as matter of policy, the NWC operates without national budget support.
But, offering some good news for NWC clients, Buchanan said projects were in train to improve over the next 24 months, storage and supply systems in
The plans include the US$211-million Jamaica water supply improvement project being funded by the France-based BNP Paribas and Bank of Nova Scotia, the Kingston water and sanitation pro-ject financed by the Inter-American Development Bank and costing US$40 million,