Consolidated Water, the seawater conversion plant and water distribution operator, is becoming increasingly confident that it will win the contract to construct the $4 million Blue Hills reverse osmosis plant, telling Wall Street analysts that it was the lowest bidder by 7 per cent on the tender.
A report by Janney, Montgomery Scott, the Wall Street brokerage, said that in the conference call to discuss Cayman-based Consolidated Water’s fourth quarter results, its “expected win of a bid in the Bahamas was of more strategic interest than the company’s reported fourth quarter results”.
In a note, Janney, Montgomery Scott said: “The most compelling discussion during the company’s conference call revolved around their bid to build an additional desalination plant (Blue Hills) in Nassau, Bahamas.
“Consolidated Water was the lowest bidder by 7 per cent and is expected to win the bid, pending government notification. Additionally, the company is still moving ahead to expand its current plant’s [Waterfields] capacity by 60 per cent.
“Once the new plant is put in place and a planned expansion takes place at the Waterfields facility, the company expects water pumped on the island [New Providence] to increase from approximately two million gallons per day to nine million gallons per day.”
Consolidated Water faces competition from four other bidders, it is understood. They are Ionics Inc, a Massachusetts firm; BIWATER International of the United Kingdom; Enerserve Veolia, part of a European environmental services group; and INIMA-IDE, a Spanish Israeli consortium.
An Ionics subsidiary, Aqua Design, operates the RO facilities at Inagua and also at Bimini. The other companies have no current interests in the Bahamas.
It is thought the estimated tenders have priced water from Blue Hills at between $4.41 – $7.09 per 1000 imperial gallons inclusive of electricity at current rates.
The proposed Blue Hills plant will be built and operated by the successful bidder, who will sell water to the government. If successful, Consolidated Water will finance construction of the Blue Hills plant through a 70/30 mix of debt and equity financing.
Once the tender is finalised next month, a temporary capability at Blue Hills is expected within six months, although it will take a year to complete the plant. The final production throughput will be five million gallons a day – roughly equal to what the Water & Sewerage Corporation is producing now from its North Andros wellfield.
The Tribune revealed last week how the tender document sent out to bidders by the Water & Sewerage Corporation appears to leave the Corporation responsible for picking up the winning bidder’s electricity costs and diesel fuel costs whenever there is a BEC power cut.
The tender document, a copy of which has been seen by The Tribune, said that provided the successful bidder met the agreed amount of water delivered and the “KVA Maximum Demand” did not exceed guarantees made at the time of the bid, “the [Water & Sewerage] Corporation shall incur the actual net billed costs of electrical power (Kilowatt Hours and KVA Maximum Demand per annum) consumed during the Desalinated Water Delivery Period)”.
The Tender added: “The Corporation shall pay all invoices presented by BEC for the electricity and maximum demand required to operate the plant during the Desalinated Water Delivery Period.”
On a power cut, a Tender clause said: “In the event of BEC power supply failure or excursion, diesel fuel used by the standby diesel generator for the production of electricity for desalinated water production shall be paid by the [successful bidder] to the fuel oil supplier and the [Water & Sewerage] Corporation will reimburse the [bidder]……”
Effectively, the tender means that the Bahamian taxpayer, through the Water & Sewerage Corporation, could end up underwriting the business plan and costs of a company such as Consolidated Water, which is listed on the US-based Nasdaq stock exchange with a market capitalisation of $110 million.
However, the reverse osmosis option faces competition from Hydro Bahamas, a private company that plans to develop a $124.4 million new 26 million gallon wellfield in Central Andros and transport the extracted fresh water to New Providence via a deep sea pipeline, tapping into natural resources which, according to the Water & Sewerage Corporation’s own research, can supply 210 million gallons of fresh water per day from north and central Andros alone.
Hydro Bahamas is proposing an initial contract with the Water & Sewerage Corporation that would see it supply a guaranteed minimum of 10 million gallons of fresh water per day to New Providence, with built-in redundancy capacity to extract a further five million gallons.
The company could eventually expand its fresh water extraction and supply business to 30-40 million gallons per day, which sources say would cover New Providence’s water needs for at least “the next 50-100 years”.
For the minimum 10 million gallon per day amount, Hydro Bahamas plans to charge $4.85 per 1,000 gallons, which is below the $6.30 per 1,000 gallons that the Water & Sewerage Corporation currently pays. If the Corporation uses more than the minimum amount, the water becomes cheaper the more it purchases, with the price above the minimum coming down to $2.85 per 1,000 gallons. Prices will be tied to the US consumer price index.
According to the documents obtained by The Tribune, Hydro Bahamas proposes to complete an Environmental Impact Assessment, feasibility study and all engineering for the first phase of the project within four months of having its Heads of Agreement approved by the Government.
In the first Phase of its project, the company plans to develop the Central Andros wellfield and install transmission lines between the wellfield to Coakley Town. A seven million gallon storage tank would also be built in Coakley Town. All water supplied by the company will be to the highest World Health Organisation (WHO) standards.
To provide redundancy capacity for its Androsia pipeline, Hydro Bahamas will also reassure the Government by providing for alternative tanker shipment of its freshwater supplies, constructing an offshore loading platform and two million gallon tank off Andros and an offloading facility in New Providence at Arawak Cay.
Transmission water mains would then be installed to take the delivered fresh water from Arawak Cay to pumping stations at Blue Hills and Winton. The company estimates this would be all completed within 11 months of the feasibility studies being completed.
The second phase will involve the laying of the 21-mile long Androsia pipeline between Coakley Town and Clifton Pier, which Hydro Bahamas estimates will take 24 months to complete once new feasibility studies have been done. These feasibility studies will take 12 months from the date the first phase is finished.
The pipeline will be laid at a depth of up to 6,500 feet, using technology that has already helped lay deepwater pipelines at 10,000 feet in areas such as the Gulf of Mexico.
The Tribune understands that Hydro Bahamas has proposed penalties against itself if it fails to deliver, such as a $15,000 per day fine for every day it runs over the completion schedule. It has also propose that the penalty levied if it fails to deliver the stipulated amount of water be double the throughput fee it would charge the Water & Sewerage Corporation.
Hydro Bahamas is understood to be confident that the pipeline will pose no ecological threat to underwater life, while the offshore loading facility will not harm any reefs. Its business plan adds that wellfields, such as the one it proposes in central Andros, have had no negative impact on ecosystems, given that one has been located within four miles from the Lucayan National Park for the last 40 years.
Neil Hartnell, Tribune Business Editor
and Larry Smith
