GEORGE TOWN - Consolidated Water Co. Ltd. (NASDAQ:CWCO), which specializes in water supply and treatment solutions, has reached a settlement with the United Mexican States concerning a terminated desalination project agreement. The resolution, achieved on May 29, 2024, ends a dispute over a public-private partnership contract that was initially canceled by Mexican authorities on June 29, 2020.
The settlement involves the sale of approximately 20.1 hectares of land and associated rights, along with project documentation, for a total of MXN$616,144,000 (around US$36,351,000 at the settlement date's exchange rate). This land in Playas de Rosarito, Baja California, was intended for the construction of a desalination plant. The land was initially acquired by the company's subsidiary for approximately US$24.2 million starting in 2012.
The legal contention began when the Mexican government terminated the partnership agreement and invited the company's subsidiary, Aguas de Rosarito, to request reimbursement for project-related expenses. In response to the termination, which the subsidiary disputed, Consolidated Water's Dutch subsidiary, CW-Coöperatief, sought arbitration under a treaty between the Netherlands and Mexico.
The International Centre for Settlement of Investment Disputes (ICSID) was approached for arbitration, but discussions between CW-Coöperatief and the Mexican government led to a suspension of tribunal appointments. The successful negotiation culminated in the discontinuation of the arbitration process on May 31, 2024, following the settlement agreement.
As part of the settlement, the Mexican infrastructure trust, Fondo Nacional de Infraestructura, agreed to buy the land from the subsidiary NSC Agua for MXN$596,144,000 (approximately US$35,171,000). Additionally, within ten days after the land sale's closing on June 10, 2024, the Mexican government is to purchase the project documentation for at least MXN$20,000,000 (around US$1,180,000).
The completion of these transactions will release both parties from any further obligations related to the original agreement, the dispute, and the arbitration. No further legal proceedings concerning the settled matters will be initiated by either party.
Consolidated Water Co. Ltd. operates in various locations, including the Cayman Islands, The Bahamas, the British Virgin Islands, and the United States, and has recently entered the U.S. desalination market with a project in Hawaii. The company is known for its advanced water production, supply, and treatment services.
InvestingPro Insights
Following the recent settlement with the United Mexican States, Consolidated Water Co. Ltd. (NASDAQ:CWCO) appears to be navigating a complex fiscal landscape. With a market capitalization of $414.88 million and a trailing P/E ratio of 12.34, the company shows a solid valuation foundation. An InvestingPro Tip indicates that CWCO holds more cash than debt on its balance sheet, which could provide financial flexibility and stability in light of the recent settlement.
Despite the potential for sales decline and an expected drop in net income this year, as noted by InvestingPro Tips, the company's cash flows can sufficiently cover interest payments, and it has maintained dividend payments for 28 consecutive years. This consistency in returning value to shareholders is underscored by a dividend yield of 1.43% and a notable dividend growth of 11.76% in the last twelve months as of Q1 2024. Additionally, the company has been profitable over the last twelve months, with an EBITDA growth of 156.81% in the same period, showcasing its operational efficiency.
Investors looking for further insights will find additional InvestingPro Tips on https://www.investing.com/pro/CWCO, which could provide a deeper understanding of the company's financial health and market position. For those interested in a comprehensive analysis, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking a total of 10 InvestingPro Tips for Consolidated Water Co. Ltd.
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