UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
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FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
October
8, 2010
(Date of
earliest event reported)
CONSOLIDATED
WATER CO. LTD.
(Exact
Name of Registrant as Specified in Charter)
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Cayman
Islands, B.W.I.
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0-25248
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98-0619652
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(State
or Other Jurisdiction of
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(Commission
File No.)
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(IRS
Employer Identification No.)
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Incorporation)
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Regatta
Office Park
Windward
Three, 4th
Floor
West Bay
Road, P.O. Box 1114
Grand
Cayman, KY1-1102
Cayman
Islands
(Address
of Principal Executive Offices)
(345)
945-4277
(Registrant’s
telephone number, including area code)
Not
Applicable
(Former
Name or Former Address, if Changed Since Last Report)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instructions A.2. below):
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Item 1.01. Entry into a Material Definitive
Agreement.
Since
July 11, 1990, Consolidated Water Co. Ltd. (the “Company”) has had the exclusive
right to provide potable water to retail customers within a specified service
area under a license issued by the Cayman Islands government. The
present service area is comprised of an area on Grand Cayman Island that
includes the Seven Mile Beach resort area and the district of West Bay, two of
the three most populated areas in the Cayman Islands. For the year
ended December 31, 2009, the Company generated approximately 40% of its
consolidated revenues and 58% of its consolidated gross profits from the retail
water operations conducted within the area covered by the license.
On July
20, 2010, the Company entered into a three-month extension of the license so
that the Company could complete negotiating the terms of a new license with the
Cayman Islands government. The license was set to expire on July 10,
2010. No other terms of the license were modified.
On
October 8, 2010, the Cayman Islands government and the Company extended the
license for an additional 30 days in order to provide the parties with
additional time to finalize a long-term license agreement.
During
the course of the negotiations, representatives of the Cayman Islands government
have indicated their intention to structure the terms of the new license to
employ a “rate of return on invested capital water rate model.” Depending
upon the terms included in such new license, the Company’s water rates to
customers could be reduced, thereby resulting in a corresponding reduction in
the Company’s operating income as compared to operating income that the Company
has historically generated under the license.
During
the one-month extension of the license, the Company intends to continue
negotiating a new license agreement with the Cayman Islands
government. As long as the Company is not in default of any terms of
the existing license, even if a new license agreement is not concluded during
the one-month extension, the Company would have a right of first refusal to
renew the license on terms that are no less favorable than those that the
government might offer in the future to a third party.
If the
Company does not enter into a new license agreement at the conclusion of the
one-month period or any agreed extension, and no other party is awarded a
license, the Company expects to be permitted to continue to supply water to its
service area. However, the terms of such continued supply may not be
as favorable to the Company as the terms of the existing license. It
is possible that the government could offer a third party a license to service
some or all of the Company’s present service area. In such event, the
Company may assume the license offered to the third party by exercising the
Company’s right of first refusal. The terms of the new license
agreement may not be as favorable to the Company as the terms under which the
Company is presently operating.
SIGNATURES
Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned hereunto duly
authorized.
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CONSOLIDATED
WATER CO. LTD.
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By:
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/s/ David W.
Sasnett
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Name:
David
W. Sasnett |
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Title:
Executive
Vice President and Chief Financial Officer |
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Date:
October 13, 2010