Solomon Water (SW) respects journalistic freedom and the holding of people and organizations accountable and applauds TSI for its ongoing efforts in this area.  We note however the recent article regarding stimulus payment to SOE’s and the comments relating to Solomon Water.

There are some issues of concern that we wish to clarify:

• TSI statement: “Whilst SIWA receives Economic Stimulus package for customer payments…”: 

SW Comment: the payment was not for customer payments – this is simply the account name that MoFT have recorded the payment against.  The stimulus was used as agreed with Government and outlined below.  We have provided a full written accounting of the funds spent.

NRW is Non Revenue Water, which is water that is not sold but lost through theft and leakage as discussed below.

During March and April when many people returned to their home villages and many expatriates left, and hotels and restaurants closed or had reduced patronage, SW’s monthly income plummeted such that severe austerity measures to curb expenditure were put in place.  In July about 40 staff had their working days reduced from 5 days to 3 and the CEO had a reduction in his salary.  All discretionary expenditure was halted.  $2m of the stimulus package was used to support the reduced revenue given SW has very high fixed costs which continued.

The employment creation allocation of $2m was used towards a major Kongulai housing resettlement project in anticipation of the Kongulai water treatment plant that is about to be tendered for construction.

• TSI statement: “…They have given many reasons that are not valid for not reading their meters and charging them thousands of dollars when they have maintained their payment on the level of when these were read. 

SW comment: SW only estimates water consumption when we cannot access the meter, the meter has been tampered with, or is not working.  This is a small percentage of total customers and the estimate is based upon historic consumption records.  Our experience is that customers do not maintain their payments at historic levels as suggested by TSI.  We request that if TSI or any particular customer has concerns or evidence to support the above statement by TSI, that they visit our customer care centre to have their concerns addressed.

• TSI statement: “…it has been the experience of many that their bills have increased…“ and “..alas this is not to be and both SIWA and Solomon Power’s bills continue to rise…”: 

SW comment: SW has had only 2 modest 5% increases in its tariff since 2015.  The actual rate of increase has been lower than the cost of living, meaning water is cheaper now than it was in 2015. The table below shows average tariff increase since 2016 being 1%, against 1.7% CPI increase over the same period.  Most fixed charges (connection, reconnection fees etc) have either remained static or decreased since 2015.

TABLE OF TARIFF INCREASE RELATIVE TO INFLATION

*Estimated CPI for 2020

Note that SW Tariff reduced by 3% in 2016

Customers who are on our CashWater pre-paid water meter system who have outstanding debts to SW have up to half of their top up used to fund the outstanding debt.  This payment has been discussed with and agreed to by the customer who would otherwise potentially remain disconnected and without water.  Some of the outstanding debt will take a few years to pay off and SW bears the foregone interest cost of this debt – not the customer.

SW is currently negotiating a tariff increase with Government for 2021 and this is likely to be just under 10%, partly due to the insufficient increases over the past 5 years.  SW is also carrying out major donor and self- funded and works to improve the quality and quantity of water available to our customers and these need to be funded.

Water loss (Non Revenue Water – NRW) through leakage and theft by illegal connections and meter tampering is around 55% of the total water produced.  This means for every 100 litres of water produced, SW only sells 45 litres.  We have an active programme to reduce NRW.  Unfortunately this is a very difficult and long duration task that will require replacement of many of our pre-independence water pipes before substantial reductions in NRW can be achieved.

Historically, SW has been handicapped by tariff increases being inadequate to cover the significant capital cost required to fund upgrade of our aging infrastructure.  Over the years, these shortfalls have compounded our cash requirements.  As a consequence, SW today is in a very different financial position to other major SOE’s (see table below) and has been under severe cashflow constraints during 2020.  This has primarily been due to Covid related reduced revenue as noted above, the costs of illegal and unmanaged logging in the Kongulai / Kohove water catchment (net cash cost to SW 2019 and 2020 about $26 m) and delays in donor reimbursements for our Auki water supply upgrade.  SW has made significant changes to manage its expenses and deferred some capital works as a consequence.  Whilst we may post a reasonable 2020 profit our free cash position remains vulnerable due to the above and the need for us to spend cash on land acquisitions and preparations for the major donor funded upgrade projects.

We request that TSI understand the differences between these SOE’s and avoids making sweeping statements about all SOE’s that may not reflect their true position.

TABLE OF COMPARATIVE SOE PERFORMANCE

All figures in Millions of Dollars

Taken from Solomon Power and Solomon Water 2019 Annual reports and the Solomon Ports 2018 Annual report (2019 not yet published)