UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
January
18, 2011
(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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o
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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o
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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o
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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 8.01. Other Events.
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 license.
On July
20, 2010, the Company entered into a three-month extension of the license to
October 10, 2010 so that the Company could complete negotiating the terms of a
new license with the Cayman Islands government. No other terms of the
license were modified.
Since
October 8, 2010, the Company and the Cayman Islands government have extended the
license two times in order to provide the parties with sufficient time to
negotiate the terms of a new license agreement.
Although
the most recent extension of the term of the license expired on January 4, 2011,
the Company and the Cayman Islands government continue to negotiate the terms
of a new long-term license agreement, and the Company is continuing
to supply water to its service area specified in the license. The
Company expects to enter into another license extension agreement with the
Cayman Islands government.
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.
After
negotiations are completed, the Company expects to enter into a long-term
license agreement with the Cayman Islands government. Even if a new
long-term license agreement is not entered into with the government, 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, 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 in the July 11, 1990
license agreement. 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/ Frederick W.
McTaggart
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Name:
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Frederick
W. McTaggart
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Title:
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President
& CEO
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Date:
January 18, 2011