After they battled it out on the House floor, the only thing we wanted to know is will there be a guaranteed rate of return? Which while it is sure to attract big money investors, it will drive rates up. Utilities Minister Ralph Fonseca told us there is no way around keeping that guaranteed rate of return.
Jules Vasquez,
Will you all remove the guaranteed rate of return?
Ralph Fonseca, Minister of Public Utilities
"Its not a guaranteed rate of return Jules, you know that. The PUC calculates what they call a WACC, which is a Weigh Average Capital Cost, and based on that WACC they decide what that profit percentage is and that is where this 12% comes in. Now you have to have some rate of return, nobody is going to get into business, or no PUC is going to regulate any kind of industry unless there is some rate of return. So yes at this time the rate of return is at 12% and I believe that it will stay there but that doesn't mean that the rate for water will stay where it is now, we'll have to see what happens at the tariff review period, but that is something for the PUC."
Jules Vasquez,
But in fact BWSL had asked for 33% and got 17% which they only accepted on a grudging basis because of this WACC which I will call a guaranteed rate of return for my naïve purposes.
Ralph Fonseca,
"For your mischievous purposes. No, no that's the way it works all over the world. You take into consideration all the amounts that have been invested into the actual capital expansion of the company and the debt servicing that's involved and then they must get some return ion their money, otherwise it doesn't make sense. For instance in the case of BWSL, if their average loans are at 11% let's say, then it means that really you only talk about a 1% difference every time they borrow a dollar. So PUC has to take the debt into consideration but we have to stay focused, I don't think that the Belizean people are so much concerned of a gallon of water as it is that they are concerned about the service and in some cases about getting water any at all, that has been the problem. Because I don't think no one denies that the BWSL today is a much more improved WASA from yesterday. However it has not been expanding fast enough, that's been the problem, it's not been to all the new areas and this is what we'll try to accelerate with the new ownership by working along with them."
Jules Vasquez,
Sir I will differ with you and say that while certain people might be appreciative for the greater services, there's been a massive increase in reconnection fee, in all related fees and there has been a 17% plus 4%, 21% increase in rates. Privatization has not helped the average consumer, it has cost them, and the water meters have changed.
Ralph Fonseca,
"You're continuing to insist on your agenda Jules, they very definitely have a better service. You know what has happened is you have more pressure in your lines, you have less time down, less time without water any at all, and we have to pay for that. My own sense, and the sense of those that are around me and who give information to me, is that the people want a good service and they understand that they have to pay for it. There are those people that will always have a problem keeping up with a rate, regardless of what that rate is, so we have to have a social rate and those are the things we will work towards."
Jules Vasquez,
From a very perverse perspective could it not be viewed that we induced under material misrepresentations in the prospectus which were not even picked up by the army of accountants that you spoke of earlier, that we induced these people to buy a "puss eena bag," and when it is in a position to be lucrative - after they went through all the transitional effects and the bad public relations, 'that Cascal increased the rates, we can't do nothing, they have a guaranteed rate of return,' we sell it off to our wealthy friends and investors who would love a guaranteed rate of return on any company.
Ralph Fonseca,
"Jules obviously we are failing in trying to make you think like the average Belizean that just wants to look at Belize developing in a positive way. You insist on coming from a perverse perspective. We have to look at the reality of things. We put the prospectus out there, it was done by independent parties, independent auditors, they had all the time in the world to do their due diligence on it. They are not saying that there's anything wrong with the prospectus, the quarrel that they had with the PUC has to do with the tariff review. They went through the tariff review period, they got in the professional that they agreed to, and the professional quoted the rate that you mentioned and they're still not happy with that so they sought whatever legal recourse that they had. That doesn't have anything to do with 'puss eena bag,' that has to do with doing business."
Jules Vasquez,
You had to give them a bailout loan, had to guarantee a bailout loan for Cascal at the end of 2002.
Ralph Fonseca,
"No its not true that we guaranteed any loan, we facilitated a loan for them in order that they could have the necessary capital expenditure to carry out the expansion of the system that we wanted to have carry out."
Jules Vasquez,
But certainly the government's facilitation or intervention in a private commercial transaction for a private company is irregular and is indicative of the fact that there was a false induction and they felt you owed them that because you set them up.
Ralph Fonseca,
"There is no false induction, nobody has ever said that, you are the only that's saying that along with the Opposition. You're insisting on saying that because you need something at 6:30 to be sensational. I can't help you with that Jules. A business transaction took place, it was a very clear and straightforward business transaction, the Belizean people now want BWSL back, the Cascal people have cooperated with us, and for the first time in the history of Belize a government has been able to go and have a utility come back in the hands of Belizeans and that's the end of story."
Contrary to what Fonseca said about the absolute necessity of a guaranteed rate of return, we note that when BTL and BEL were privatized, investors were not given a guaranteed rate or return. But in the recent BTL buyback government has confirmed that the Ashcroft group of companies is requesting a guaranteed rate of return.
