fp Turks and Caicos

The Turks and Caicos Islands government has agreed to sell its minority 46 percent shareholding in the Provo Water Company for $7.5 million to the majority shareholder, Turks and Caicos Water Company.

The deal will not affect water rates but will earn $7.5 million for government, which has never made any money off the 20-year-old investment, according to a government statement June 11.

Turks and Caicos Water Company, which is owned by the HAB Group, produces water on Providenciales by reverse osmosis. Provo Water Company, of which HAB owns 54 percent, distributes the water.

“Selling this minority stake in Provo Water will allow us to pay down our debt, build up reserves for the future and focus public spending on key priorities, which was not bringing benefit to the people of TCI,” said His Excellency the Gov. Ric Todd.

The purchase price for the shares was based on a valuation by energy consultants Castalia, taking in into account cash flows through 2031, factoring in population growth, including a terminal asset value, government said.

If Turks and Caicos Water sells Provo Water within 10 years, government would receive a share of any windfall profit.

Former Chief Minister Washington Misick questioned the transparency and wisdom of the transaction. He told the fp that the government’s shares originally were meant to be sold to the public as investments in the utility.

Attorney General Huw Shepheard said the private company would have to be converted to a public company to sell shares publicly, a move that would require the approval of majority shareholder HAB.

Government said its ownership in Provo Water is at odds with its position as water regulator. After selling its shares, government plans to establish a new regulatory framework with a revised selling price formula, formalised review periods and enhanced quality control mechanisms.

“It is better to realize these monies and put them to good use than for our investment to remain idle,” said government CEO Patrick Boyle. “Further, the government can now better assume its proper role, ensuring consumer rights are protected rather than attempting to increase profits to maximize its return.”

Turks and Caicos Water said the transaction will allow it to continue to develop and maintain the water infrastructure on Providenciales.

“The water companies currently supply over 30 million gallons per month to our customers across Providenciales and have invested over $10 million during the past five years to ensure that demand has been met,” Turks and Caicos Water said in a statement. “Those investments include a new reverse osmosis production facility, booster pump stations at strategic points to improve water pressure along with additional storage tanks across the island.”

Meanwhile, government is still struggling to improve water supplies on Grand Turk, South Caicos and Salt Cay where it operates reverse osmosis plants. The 2012-13 budget set aside $1.3 million for that work.

For months now, residents of Grand Turk have been plagued by production problems in the government water system. On June 11, the Public Works Department said recent repairs of stainless steel pipes were successful but water production has not resumed because additional parts are needed for repairs.

“The department is aware of the new technical difficulties and new parts were ordered over the weekend, which will arrive early this week and be fitted by the middle of the week, with production of water likely to commence towards the end of this week,” the Public Works Department said.

The department said it is currently determining the requirements for a new larger water production to be installed on Grand Turk to replace two of the older plants. With the installation expected in the autumn of 2012, customers should see improved service, the department said.