The Turks and Caicos Islands government agreed on Monday 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 government has held its stake since the 1990s and has received no dividend due to the level of capital investment made by the company. The government has determined that this minority shareholding is an idle asset, delivers no value to the taxpayer after two decades 20 years of involvement. The government has decided to convert the investment into cash to use to achieve infrastructure improvements elsewhere in TCI.
The agreed price, based on a valuation by Castalia LLC, takes into account realistic future cash flows through to 2031, factoring in population growth, including a terminal asset value. The sale is planned to proceed on 15 June 2012, subject to legal agreement.
Selling this unproductive minority stake in Provo Water will make it possible for the government to reduce its annual interest bill on its debt, allowing more of its recurrent income to be invested into key priorities such as health, education, maintenance and capital.
The government’s role as a shareholder in the water supply company on Providenciales is also at odds with its role as a water regulator. The government will now concentrate on strengthening its responsibility of regulating the water sector, and has built consumer and taxpayer protections into the deal:
1. Consumer protection – a new regulatory framework is being established to provide additional governance over the water sector with a revised selling price formula, formalised review periods and enhanced quality control mechanisms.
2. Windfall – should Turks and Caicos Water Company sell Provo Water Company within 10 years, TCIG would receive a share of this windfall profit, assuming the value of the shares had increased during this period.
“Government has a duty to ensure that all of its assets are used to create the best value for the taxpayer,” said Patrick Boyle, government chief executive. “It is better to realize these monies and put them to good use than for our investment to remain idle. 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."
"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 Governor Ric Todd.
He also underlined the government’s stated intention to address the water supply issues on Grand Turk, South Caicos and Salt Cay. The 2012/13 budget set aside $1.3 million for immediate work on this.