Consolidated Water mulls its options on Grand Cayman

On 20 July, Nasdaq-listed Consolidated Water (CWCO) negotiated a three-month extension to its 20-year-old licence to supply desalinated water to retail customers on the island of Grand Cayman.

The agreement will give the company more time to fine-tune the terms of a new licence with the government, although the outcome is far from certain. CWCO is concerned that the government’s proposal to alter the terms of the existing licence to a model based on a rate of return on invested capital could reduce retail water tariffs in its franchise area, which would negatively impact its operating margin. 40% of CWCO’s revenues and 58% of its gross profit in 2009 were generated from the retail business on Grand Cayman.

Even if the government opts to offer the new licence to a third party, CWCO retains the first right of refusal to renew its current licence on no less favourable terms.