Consolidated Water’s proposed mega-project in Baja California, Mexico, faces an uncertain future owing to "significant macroeconomic changes" since the US presidential election of November 2016.
The company’s 10-K filing – its company annual performance report published on 16 March 2017 – states: “Both the exchange rate for the Mexico peso relative to the dollar and general macroeconomic conditions in Mexico have declined since the US presidential election in November 2016. These changes have adversely impacted the estimated construction, operating, and financing costs for the project.”
Aguas de Rosarito (AdR), a special purpose joint venture set up to deliver the project by Consolidated’s Mexican subsidiary NSC Agua, and NuWater, has proposed to Baja California State Water Commission (CEA) an increase to the water tariff agreed in the original public-private partnership contract, “to compensate for changes in foreign exchange rates, lending rates and certain changes in law which have impacted the project. The company is currently unable to say whether or not such water tariff increase will be approved.”
The total project cost is expected to be approximately MXN 9 billion (US $463 million based on the currency exchange rate as of 10 March 2017).
Consolidated Water’s filing details the general administrative expenses relating to the project’s development activity, consisting of organisational, legal, accounting, engineering, consulting and other costs. Such expenses amounted to approximately $3 million in 2016, $2 million in 2015, and $3.7 million in 2014.
Further, if AdR is unable to proceed with the project, the land that NSC purchased may lose its strategic importance and therefore some of its value. The current carrying value is $20.6 million. “Any loss on sale of the land, or impairment loss NSC may be required to record as a result of a decrease in the fair value of the land could have a material adverse impact on our results of operations,” the 10-K stated.
The Rosarito Beach project is an ambitious proposed SWRO mega-plant with the potential to serve the populations of Baja California, Mexico, and Otay Water District, California.