By VERNON CLEMENT JONES, Guardian Business Editor, vernon@nasguard.com

Consolidated Water's revamped Windsor treatment plant continues to drag down its bottom line, a decline in large part owing to a spike in fuel costs now hitting all businesses in this country.

"Approximately $207,000 was incurred in diesel costs during the first three months of 2008 that could not be billed to the Water and Sewerage Corporation," reads the company's 1Q report, released Monday afternoon.

That loss comes despite an agreement with the government enabling the company to pass on fuel costs associated with the oldest of its two New Providence water treatment plants. WSC relies on that facility as well as the new Blue Hills plant to feed the public grid.

"Our contract with WSC for our Windsor plant provides for the pass through of increases in diesel costs to the WSC if the plant is operating at or better than the efficiency specified in the contract," says the company in that same quarterly report. "In early 2006, we reconfigured the Windsor plant in order to mitigate membrane fouling.

"However, this reconfiguration resulted in a decrease in the fuel efficiency of the Windsor plant and we have not been able to pass through all of our diesel costs to the WSC."

That development effectively let WSC off the hook for $207k in fuel expenses incurred in the first three months of the year, alone. More savings for the government is likely on the way, concedes Consolidated CEO Rick McTaggart, referring to the company's continuing struggle to process particularly briny water at Windsor. That's not a problem at Blue Hills, said McTaggart Tuesday.

"We are currently constructing new feed water wells and will replace the reverse osmosis membranes on two of four of our production trains," reads the 1Q filing. "While we anticipate that these improvements will allow us to reverse the plant reconfiguration and improve the Windsor plant's fuel efficiency by the end of the third quarter of 2008, our gross profit for our Bahamas operations in the interim will continue to be adversely affected by its diesel costs."

The company has already seen a 58-percent rise in diesel fuel prices over the past 12 months. It's the same increase that almost all Bahamian businesses are now grappling with as global oil prices continue to break record highs for all petroleum products.

Consolidated's Windsor plant continues to attract a disproportionate share of the company's expenses on the island as well as the associated repairs and maintenance costs. Those last two — over the first three months of the year — exceeded 2007 1Q numbers by $271,000.

The overall impact of diesel costs at Windsor have helped drive down profits for both the Bahamas-based affiliate and its Caymans parent.

"Gross profit as a percentage of bulk revenues declined from 26 percent in 2007 to 17 percent in 2008 primarily due to additional diesel and maintenance costs for our Bahamas operations," says the company.