Watlington Waterworks Directors Report
In a filing with the Bermuda Stock Exchange [BSX], Watlington Waterworks Ltd. released their Directors report to the shareholders.
The full filing stated:
The Year 2020 will long be remembered for the outbreak of the COVID-19 pandemic. The Company started the year very strongly and by the end of the first Quarter had recorded one of its strongest starts to a year ever. In late March Bermuda went into “Shelter-in-Place” mode as coping with the pandemic became the national priority.
While sales were substantially reduced, operating expenses declined as less production was required. Fortunately, demand remained stronger than initially anticipated in part due to below average rainfall and changing life patterns as people adapted to working from home. Sales from March onwards declined relative to previous years however, they remained stronger than forecast after the onset of the pandemic for much of the year. This has resulted in a much more satisfactory performance than initially forecast at the beginning of “Shelter in Place.”
Shareholders will have noted an accumulation of cash and investments in short-term deposits over the past four years. This occurred due to the lengthy process for acquiring land and approval to build a new reservoir and satellite treatment facility in Southampton. There was a decline in annual infrastructure investment during this period which resulted in the substantial cash and investments recorded on the balance sheet.
The Board is taking a long-term approach to infrastructure investment since the life of assets well-built will last more than a hundred years and views the effects of the pandemic as a short-term negative. The Company entered into an agreement with D & J Construction Ltd. late in the year to build a 3-million-gallon reservoir and Phase 1 of a future treatment plant building. Work commenced in February this year and is expected to be completed by June of next year.
The construction project, together with associated infrastructure is budgeted to cost $16 million. This will be financed by use of cash resources and liquidating short-term investments. The cash and investments accumulated on the Balance Sheet over the past four years will be drawn down over the next 18 months. In addition to the reservoir project the Company has this year committed to installing a new water main in Middle Road from Belmont to Barnes’ Corner as part of a shared trenching project with BELCO who are leading on the project.
After the Middle Road pipeline project is completed, the Company will have water mains from Devonshire to Somerset with redundancy to distribute via South Road, Middle Road and Harbour Road. This will augment operations with the new reservoir. The Company will be able to distribute piped water either from Devonshire westwards or from Southampton eastwards and westwards. The Company will finally achieve a long-term goal to have up to 5 days reserve water supply on hand to provide a more secure future customer water supply for the western half of Bermuda.
Looking forward the new reservoir will have over 20,000 square feet of flat roof area. It has been designed to be able to support a solar farm on the roof. The Company is mindful of its carbon footprint and intends to invest in future supplementary renewable energy supplies to offset its energy demands in Southampton and elsewhere.
The Year 2021 is expected to be a significantly weaker year than 2020. Apart from COVID-19 continuing to affect demand for our products and services, Bermuda has received above average rainfall for the first quarter which has further depressed demand. Last year we had the benefit of a very strong pre-COVID first quarter to provide a solid foundation for a satisfactory result. This year is very different with weak demand from the beginning of the year.
Providing Bermuda reaches herd immunity later this year and we can “reopen,” we anticipate a recovery starting later this year. How long it will take to return to pre-pandemic demand is unknown. The Company is positioning itself to be able to meet future demand with financial flexibility that allows the Company to make appropriate timely, targeted investment to successfully adapt to market conditions.
