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
November
12, 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 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 until November 10, 2010.
On
November 12, 2010, in order to provide the parties with additional time to
finalize a long-term license agreement, the Cayman Islands government and the
Company agreed to another extension of the license until January 4,
2011.
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 approximately two-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 approximately two-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
approximately two-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 in 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/ Frederick W.
McTaggart
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Name:
Frederick
W. McTaggart |
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Title:
President
& CEO |
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Date:
November 19, 2010