Int'l Trust raises $350m for NWC

Moses

INTERNATIONAL Trust and Merchant Bank, (ITMB) the lead agency selected to structure the $1.5 billion water financing deal, has raised $350 million of the funds on the open market on behalf of the National Water Commission (NWC).

"Money is out there," said NWC president E.G. Hunter who told the Financial Gleaner that he anticipates no difficulty raising the rest of the funds. "My only concern is the rate at which we can borrow."

The Bank of Nova Scotia has approached NWC about the plan, said Mr. Hunter, and Citibank, NA also wants in on the deal.

Citibank, corporate officer Peter Moses said on Tuesday that he has put some options before the Water Commission, and is willing to help structure the loan as well as lend the water agency funds but hasn't got to the stage of actually talking money yet.

The water plan announced by Government in September, involves the upgrading of old infrastructure as a minor component, and the development of some 108 new water supply schemes, which will take up 70-80 per cent of the investment.

Mr. Hunter says his agency, a state monopoly, plans to raise the full amount over time, and has instructed ITMB to approach the market in stages as the funds become needed, to mitigate interest costs. The water agency has been given 18 months, starting September 1, to complete the new systems.

The first tranche of $350 million was raised through local private placements including banks and other institutional clients, says ITMB's Christopher Witter.

The funds are already being spent, said Mr. Hunter, through Carib Engineering Corporation Limited, another Government agency with responsibility for developing capital water systems. Once the systems are built, NWC takes over the operation and maintenance.

Under the loan terms, NWC has a moratorium of 18 months on the loan principal, and three years thereafter to repay it, in six-month intervals.

Its interest payments, fixed at a six month weighted average Treasury Bill rates plus 1.78 per cent, begin January 16, 2002. The full shock of the 4 per cent upward movement in interest rates this week will be cushioned in the weighting.

The first quarterly interest pay out is expected to amount to $13.2 million, said Witter.

Hunter said he was "happy" with the deal that also got the endorsement of the Ministry of Finance, which is standing security for the loan.

The $1.5 billion programme was initially announced as a plan to provide free water to the very poor, and to improve supplies to several areas including rural communities.

But on Wednesday Mr. Hunter said once operational the estimated 200,000 more persons who will have access to water through the new systems, will be billed at the same rates and charges as any other customer of the NWC.

"The Commission is mandated to operate as a business... It is certainly not my understanding that people will get free water," he told the Financial Gleaner.

The estimated internal rate of return on the $1.5 billion investment is 17 per cent.

But those projections are predicated "on the assumption that we will collect the revenues," said Hunter who, through an aggressive drive to collect receivables including the over $120 million owed by Government agencies, plans to bring collection efficiency levels to 90 per cent, up from 85-87 per cent.

For financial year ended March 2000, NWC consumer accounts receivables stood at $1.997 billion.

The NWC bills its customers within three rate categories:

A commercial rate of $47.81 per 1,000 litres for industrial/commercial consumers, and $23.71 per 1,000 litres for condominiums;

Domestic rates that range between $12.95 and $49.65 per 1,000 litres, where the rate applied varies with consumption.

School rate fixed at $4.23 per 1,000 litres.

The domestic and commercial rates were gazetted on January 22, 1999, but not the school rates which the NWC, as part of the 'good corporate citizen' image it is trying to build, introduced as a service to the education community.

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