Business Context and Reporting Period
This Form 8-K filing by Consolidated Water Co. Ltd. (the "Company") reports on events occurring on January 2, 2019. The Company, incorporated in the Cayman Islands, operates water production facilities, including Consolidated Water (Belize) Limited ("CW-Belize"), which serves Ambergris Caye, Belize.
Key Financial Metrics and Transaction Details
The filing details a definitive agreement to sell CW-Belize to Belize Water Services Ltd. ("BWSL").
- Purchase Price: $7.0 million, subject to adjustments.
- Price Adjustments: Based on unpaid invoices, cash held by CW-Belize (target: $1.7 million), and consumables inventory (target: $450,000).
- Debt Forgiveness: CW-Belize will forgive approximately $1.8 million of intercompany debt owed to the Company prior to closing.
- Cash Repatriation: The Company has repatriated $2.75 million in Q3 2018 and $1.0 million subsequently, with an anticipated additional $1.05 million before closing.
- CW-Belize Historical Performance:
- Nine months ended Sept 30, 2018: Sales of $2.4 million; Net income of $870,000.
- Year ended Dec 31, 2017: Sales of $2.9 million; Net income of $1.0 million.
Material Changes and Conditions
The transaction represents a material change in the Company's asset base, divesting its Belizean operations. The closing is scheduled for on or before January 16, 2019. A critical condition to the transaction is the Company's ability to repatriate sufficient cash from CW-Belize to reduce the subsidiary's cash balance to $1.7 million. This process requires approval from the Central Bank of Belize and is contingent on the availability of U.S. dollars within Belizean banks, which has historically been limited due to economic weakness in Belize.
Outlook, Risks, and Contingencies
Management anticipates the transaction will close by mid-January 2019, facilitated by BWSL's assistance in currency conversion and repatriation. Key risks include:
- Regulatory Approval: Failure to obtain Central Bank of Belize approval for currency conversion and fund transfers.
- Liquidity Constraints: Insufficient U.S. dollar availability in Belizean banks to execute transfers.
- Closing Conditions: Failure to satisfy customary representations, warranties, or the specific cash balance condition.
- Forward-Looking Statements: Actual results may differ materially from expectations due to market acceptance and relationship changes with BWSL.
Investor Verification Checklist
- Verify the final closing date and whether the transaction was completed by January 16, 2019.
- Confirm the final purchase price after adjustments for cash, inventory, and unpaid invoices.
- Monitor the successful repatriation of the remaining $1.05 million in cash from Belize.
- Review subsequent filings for any updates on the Central Bank of Belize's approval status.
- Assess the impact of the $1.8 million intercompany debt forgiveness on the Company's consolidated financial statements.