Company Moves to Abandon Baja Water Deal
Rob Davis
Voice of San Diego
11/10/2011
A key partner is taking steps to pull out of a seawater desalination plant planned in Rosarito Beach that could supply drinking water to local homes and businesses.
Consolidated Water Co., a small, publicly traded firm, announced Wednesday that it's trying to sell its stake in the project, highlighting just how difficult it will be for local water agencies to tap Mexico's ocean as a new supply.
Cayman Islands-based Consolidated promised last year to invest $4 million in the deal, which then encountered delays and didn't receive any needed permits. After spending that money, Consolidated said it needed to decide whether to continue investing. Its announcement Wednesday suggests it has had enough.
The Otay Water District, the local agency that supplies water to 200,000 people from Otay Mesa to Jamul, wants to buy water from the proposed plant. The district has spent $674,000 on the plan and has committed to spending $4 million more.
Consolidated was a key participant. Records show the district went as far as to spend at least $6,700 sending its general manager and two attorneys to the Cayman Islands to meet with the company before it agreed to get involved last year.
Consolidated said if a sale falls through, it would consider seeking other buyers, restructuring the partnership or canceling its involvement altogether.
The company's withdrawal could hurt the project's perception. Otay surveyed its customers last December and found that they were concerned about getting their water from Mexico. They overwhelmingly said they preferred to get water from the United States.
But the survey also found that customers responded favorably when they heard a well-established, publicly traded, global company was involved. If Consolidated Water pulls out, it could leave the deal without that key selling point.
In its third-quarter earnings release, Consolidated CEO Rick McTaggart spoke generally about the project's problems. He said it has been unable to secure additional funding and hadn't addressed "remaining uncertainties."
"Although we are very disappointed that this particular opportunity has not developed as planned," McTaggart said, "we have acquired a great deal of knowledge and expertise regarding the water markets in Mexico and the southwestern United States and expect to explore other opportunities in these regions in the future."
