CWCO

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How CWCO rewrote its risk factors

10-K ITEM 1A · FY2024 → FY2025

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The production capacity of the West Bay plant is 2.0 million gallons of water per day. Electricity is supplied to our plants by Caribbean Utilities Co.
Standby generation capacity is available at our ACWW plants and West Bay plant to operate a portion of the water production capacity as well.
We generate renewable energy to power our distribution pumps at ACWW using solar panels installed on the top of one of our water storage reservoirs. Our distribution system is connected to the distribution system of the WAC.
The provision for credit losses for our retail operations has historically represented less than 1% of our total annual retail sales.
Demand depends upon various factors, most notably rainfall and the number of tourists staying on Grand Cayman during any particular time of the year.
In general, the majority of tourists come from the United States during the winter which is also the dry season in the Cayman Islands. Bulk Water Operations For fiscal years 2025, 2024, and 2023, our bulk water operations accounted for approximately 25%, 25%, and 19%, respectively, of our consolidated revenue.
The plants we operate for the WAC are located on land owned by the WAC. Our agreement with the WAC for the North Sound and NSWW plants expires on July 1, 2026.
We maintain a standby generator with sufficient capacity to operate essential equipment at our Windsor and Blue Hills plants and are able to produce 100% of the production capacity with these plants during temporary interruptions in the electricity supply from BPL. Services Operations For fiscal years 2025, 2024, and 2023, our services operations accounted for approximately 35%, 38% and 54%, respectively, of our consolidated revenue. We provide design, engineering and construction services for desalination infrastructure projects through DesalCo, an original equipment manufacturer of seawater reverse osmosis desalination plants.
Presently, DesalCo is providing engineering, management and purchasing services to CW-Bahamas and our affiliate OC-BVI in the British Virgin Islands.
REC operates and maintains water and wastewater treatment facilities and provides technical services to clients throughout the Rocky Mountain and Eastern Plains Regions of Colorado. Manufacturing Operations For fiscal years 2025, 2024, and 2023, our manufacturing operations accounted for approximately 14%, 13% and 10%, respectively, of our consolidated revenue.
In the event of a tied vote of the Directors, the President of the Caribbean Water and Wastewater Association, a regional trade association comprised primarily of government representatives, is entitled to appoint a junior director to cast a deciding vote. DesalCo provides certain engineering and administrative services to OC-BVI for a monthly fee and a bonus arrangement which provides for payment of 4% of the net operating income of OC-BVI. We account for our investment in OC-BVI using the equity method of accounting. OC-BVI sells bulk water to BVIW&S, which distributes the water through its own pipeline system to residential, commercial and tourist properties on the islands of Tortola and Jost Van Dyke in the British Virgin Islands. OC-BVI owns and operates a desalination plant located at Bar Bay, Tortola with a capacity of 720,000 gallons per day.
This concentrate is discharged without passing through the membrane, and the remaining hydraulic energy in the concentrate is transferred to the initial saline feed water stream with an energy recovery device thus reducing the total energy requirement for the reverse osmosis system.
As a result of our decades of experience in seawater desalination, we believe our expertise and experience with respect to the development and operation of desalination plants and similar facilities is easily transferable to locations outside of our historical operating areas as demonstrated by the recent award to us of a reverse osmosis desalination project in Honolulu, Hawaii, USA. Wastewater Treatment Technology Our approach to wastewater treatment integrates advanced technologies and processes to ensure high-quality reuse water while addressing environmental and operational concerns.
Typical technologies employed include micro and ultra filtration, reverse osmosis, and ultraviolet advanced oxidation systems, often with sodium hypochlorite or hydrogen peroxide as oxidizers, to meet the stringent water quality parameters in the areas we serve.
This is particularly relevant for applications like reuse and indirect potable reuse, where safety and quality are paramount. We utilize Membrane Bioreactor (“MBR”) technology, which is a wastewater treatment process that has been used for several decades to produce high quality recycled water for non-potable reuse.
We conceal equipment and housing technologies in buildings that are both aesthetically pleasing and low odor, thereby addressing two of the common challenges in wastewater treatment facilities: odor and visual impact.
In the Cayman Islands, we normally sell more water during the first and second quarters of the year, when the number of tourists is greater and local rainfall is less than in the third and fourth quarters. The business conducted by Aerex, REC, and PERC is generally not subject to seasonal variations. Government Regulations, Custom Duties and Taxes Our operations and activities are subject to the governmental regulations and taxes of the countries in which we operate.
The Cayman Islands are a British Overseas Territory situated in the central western Caribbean Sea.
We operate all but one of the reverse osmosis desalination plants owned by the WAC on Grand Cayman and supply water under three agreements held by OC-Cayman with the WAC. According to the most recent information published by the Economics and Statistics Office of the Cayman Islands Government, the population of the Cayman Islands was estimated in 2024 to be 88,833.
According to the figures published by the Department of Tourism Statistics Information Center, in 2025 as compared to 2024, tourist air arrivals increased by 2.9% to approximately 450,000 and tourist cruise ship arrivals decreased by 1.4% to approximately 1,062,000. Our water sales in the Cayman Islands are more positively impacted by stay-over tourists that arrive by air than by those arriving by cruise ship, since cruise ship tourists generally only visit the island for less than one day and do not stay in hotels or condominiums.
The Bahamas are an independent nation situated in the western Atlantic Ocean just off the east coast of the State of Florida, USA.
According to statistics published by the Bahamas Ministry of Tourism, in 2025 as compared to 2024, the number of air arrivals decreased by 2% to approximately 1,290,000 and cruise ship arrivals increased by 6% to approximately 4,153,000. British Virgin Islands .
The British Virgin Islands are a British Overseas Territory situated east of Puerto Rico.
They comprise 16 inhabited islands out of approximately 60 islands and cays, with Tortola being the largest and most populated.
The British Virgin Islands serve as a hub for yacht-chartering businesses.
According to government statements, tourism arrivals to the British Virgin Islands in 2025 increased by 10% compared to 2024. Competition Cayman Islands.
We have competed with companies such as Veolia, IDE Technologies and small local contractors for bulk water supply contracts with the WAC, and expect to compete with these and other companies for any new water supply contracts awarded by the WAC. The Bahamas .
We have historically experienced low employee turnover. As of March 9, 2026, we employed a total of 293 persons, 65 in the Cayman Islands, 206 in the United States, 20 in The Bahamas and two in The Netherlands.
We have 20 management employees and 58 administrative and clerical employees.
The Code of Business Conduct and Ethics; the charters of the Audit Committee, Compensation Committee, Nominations and Corporate Governance Committee, and Environmental and Social Governance Committee; and the Corporate Governance Guidelines of our Board of Directors are available at the Investors section of our website. You may access, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, plus amendments to such reports as filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, on our website and on the website of the Securities and Exchange Commission (the “SEC”) as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
Each of these risks, as well as other risks and uncertainties not presently known to us or that we currently deem immaterial, could adversely affect our business, results of operations, cash flows and financial condition, and cause the value of our common stock to decline, which may result in the loss of part, or all, of your investment. Our exclusive license to provide water to retail customers in the Cayman Islands is presently under renegotiation with OfReg, the Cayman Islands government utility regulatory authority, and we are presently unable to predict the outcome of these on-going negotiations. We sell water through our retail operations under the 1990 license that granted Cayman Water the exclusive right to provide potable water to customers within its licensed service area.
In 2025, 2024, and 2023, we generated approximately 26%, 24% and 17%, respectively, of our consolidated revenue and 39%, 38% and 26%, respectively, of our consolidated gross profit from the retail water operations conducted under the 1990 license. The 1990 license was originally scheduled to expire in July 2010 but was extended several times by the Cayman Islands government in order to provide the parties with additional time to negotiate the terms of a new license agreement.
From that date through February 18, 2025, we continued to operate under the terms of the 1990 license, treating such terms as operative notwithstanding the expiration of the express extension.
We continued to pay a royalty of 7.5% of the revenue we collected as required under the 1990 license. In October 2016, the Government of the Cayman Islands passed legislation which created OfReg and, in April 2017, passed supplemental legislation which transferred responsibility for the economic regulation of the water utility sector and the negotiations with us for a new retail license to OfReg. Under the new regulatory legislation passed in October 2016, Cayman Water was required to first be granted a concession by the government before obtaining a new (or renewing the old) retail operations license.
On February 18, 2025, Cayman Water received a new concession from the government that authorizes and maintains the terms of the 1990 license until a new license from OfReg is negotiated and enacted.
Negotiations between Cayman Water and OfReg for the new license remain on-going. We have been informed during our retail license negotiations, both by OfReg and its predecessor in these negotiations, that they seek to restructure the terms of the license in a manner that could significantly reduce the operating income and cash flows we have historically generated from our retail license.
We are presently unable to determine what impact the resolution of our retail license negotiations will have on our consolidated financial condition, results of operations or cash flows but such resolution could result in a material reduction (or the loss) of the operating income and cash flows we have historically generated from our retail operations and could require us to record impairment losses to reduce the carrying values of our retail segment assets.
As a result, our Bahamas subsidiary could have insufficient liquidity to continue operations, and our consolidated financial results could be materially adversely affected. CW-Bahamas’ accounts receivable balances (which include accrued interest) due from the WSC amounted to $20.7 million and $28.4 million as of December 31, 2025 and 2024.
Approximately 71% and 81% of the accounts receivable balances were delinquent as of those dates, respectively.
As of February 28, 2026, this receivable amounted to $22.6 million, of which 75% was delinquent.

and 17 more.

Gone since FY2024

The production capacity of the West Bay plant is 1.0 million gallons of water per day. Electricity is supplied to our plants by Caribbean Utilities Co.
Standby generation capacity is available at our ACWW plants and West Bay plant to operate a portion of the water production capacity as well. Our distribution system is connected to the distribution system of the WAC.
The provision for credit losses has historically represented less than 1% of our total annual retail sales.
Demand depends upon various factors, most notably rainfall amounts and the number of tourists visiting Grand Cayman during any particular time of the year.
In general, the majority of tourists come from the United States during the winter which is also the dry season in the Cayman Islands.
The COVID-19 pandemic and the resulting cessation of tourism to the Cayman Islands significantly reduced demand for our water.
In August 2022, the Cayman Islands government lifted the COVID-19 pandemic related travel restrictions that had eliminated tourist travel to the Cayman Islands since March 2020. Bulk Water Operations For fiscal years 2024, 2023, and 2022, our bulk water operations accounted for approximately 25%, 19%, and 35%, respectively, of our consolidated revenue.
The plants we operate for the WAC are located on land owned by the WAC. Our agreement with the WAC for the North Sound and NSWW plants expires in 2026.
We maintain a standby generator with sufficient capacity to operate essential equipment at our Windsor and Blue Hills plants and are able to produce 100% of the production capacity with these plants during temporary interruptions in the electricity supply from BPL. Services Operations For fiscal years 2024, 2023, and 2022, our services operations accounted for approximately 38%, 54% and 31%, respectively, of our consolidated revenue. We provide design, engineering and construction services for desalination infrastructure projects through DesalCo, an original equipment manufacturer of seawater reverse osmosis desalination plants.
DesalCo sometimes tests new components and technology offered by suppliers in our business and, at times, collaborates with suppliers in the development of their products.
Presently, DesalCo is providing engineering, management and purchasing services to our affiliate OC-BVI in the British Virgin Islands.
REC operates and maintains water and wastewater treatment facilities and provides technical services to clients throughout the Rocky Mountain and Eastern Plains Regions of Colorado. Manufacturing Operations For fiscal years 2024, 2023, and 2022, our manufacturing operations accounted for approximately 13%, 10% and 7%, respectively, of our consolidated revenue.
In the event of a tied vote of the Directors, the President of the Caribbean Water and Wastewater Association, a regional trade association comprised primarily of government representatives, is entitled to appoint a junior director to cast a deciding vote. Through DesalCo, we provide certain engineering and administrative services to OC-BVI for a monthly fee and a bonus arrangement which provides for payment of 4% of the net operating income of OC-BVI. We account for our investment in OC-BVI using the equity method of accounting. OC-BVI sells bulk water to BVIW&S, which distributes the water through its own pipeline system to residential, commercial and tourist properties on the islands of Tortola and Jost Van Dyke in the British Virgin Islands. OC-BVI owns and operates a desalination plant located at Bar Bay, Tortola with a capacity of 720,000 gallons per day.
This concentrate is discharged without passing through the membrane, and the remaining hydraulic energy in the concentrate is transferred to the initial saline feed water with an energy recovery device thus reducing the total energy requirement for the reverse osmosis system.
As a result of our decades of experience in seawater desalination, we believe our expertise and experience with respect to the development and operation of desalination plants and similar facilities is easily transferable to locations outside of our historical operating areas as demonstrated by the recent award to us of a reverse osmosis desalination project in Honolulu, Hawaii, USA. Wastewater Treatment Technology Our approach to wastewater treatment integrates advanced technologies and processes to ensure high-quality water reuse while addressing environmental and operational concerns.
Typical technology uses include that of micro and ultra filtration, reverse osmosis, and ultraviolet advanced oxidation systems, often with sodium hypochlorite or hydrogen peroxide as oxidizers, to meet the stringent water quality parameters set by California.
This is particularly relevant for applications like Title 22 reuse and Indirect Potable Reuse, where safety and quality are paramount. We utilize Membrane Bioreactor (“MBR”) technology, which is a wastewater treatment process that has been used for several decades to produce high quality recycled water for non-potable reuse.
We conceal equipment and housing technologies in buildings that are both aesthetically pleasing and odor friendly, thereby addressing two of the common challenges in wastewater treatment facilities: odor and visual impact.
The COVID-19 pandemic and the resulting cessation of tourism to the Cayman Islands significantly reduced demand for our water in 2021.
In August 2022, the Cayman Islands government lifted the COVID-19 pandemic related travel restrictions that had eliminated tourist travel to the Cayman Islands since March 2020.
Demand for our water in The Bahamas was not affected to the same degree by the drop in tourism resulting from the COVID-19 pandemic. The business conducted by Aerex, REC, and PERC is generally not subject to seasonal variations. Government Regulations, Custom Duties and Taxes Our operations and activities are subject to the governmental regulations and taxes of the countries in which we operate.
We operate all but one of the reverse osmosis desalination plants owned by the WAC on Grand Cayman and supply water under three agreements held by OC-Cayman with the WAC. According to the most recent information published by the Economics and Statistics Office of the Cayman Islands Government, the population of the Cayman Islands was estimated in 2023 to be 84,738 after the 2021 census count.
According to the figures published by the Department of Tourism Statistics Information Center, in 2024 as compared to 2023, tourist air arrivals increased by 2% to approximately 438,000 and tourist cruise ship arrivals decreased by 15% to approximately 1,076,000. We believe that our water sales in the Cayman Islands are more positively impacted by stay-over tourists that arrive by air than by those arriving by cruise ship, since cruise ship tourists generally only visit the island for less than one day and do not stay in hotels or condominiums.
According to statistics published by the Bahamas Ministry of Tourism, in 2024 as compared to 2023, the number of air arrivals decreased by 1% to approximately 1,320,000 and cruise ship arrivals increased by 25% to approximately 3,901,000. British Virgin Islands .
The British Virgin Islands are a British Overseas Territory and are situated east of Puerto Rico.
They consist of 16 inhabited and more than 20 uninhabited islands, of which Tortola is the largest and most populated.
The British Virgin Islands serve as a hub for many large yacht-chartering businesses. Competition Cayman Islands.
We have competed with such companies as Veolia, IDE Technologies and small local contractors for bulk water supply contracts with the WAC and expect to compete with these and other companies for any new water supply contracts awarded by the WAC. The Bahamas .
We have historically experienced low employee turnover. As of March 10, 2025, we employed a total of 307 persons, 62 in the Cayman Islands, 226 in the United States, 17 in The Bahamas and two in The Netherlands.
We have 23 management employees and 60 administrative and clerical employees.
The Code of Business Conduct and Ethics, the charters of the Audit Committee, Compensation Committee, Nominations and Corporate Governance Committee, Environmental and Social Governance Committee and the Corporate Governance Guidelines of our Board of Directors are available at the Investors section of our website. You may access, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, plus amendments to such reports as filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, on our website and on the website of the Securities and Exchange Commission (the “SEC”) as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
Each of these risks, as well as other risks and uncertainties not presently known to us or that we currently deem immaterial, could adversely affect our business, results of operations, cash flows and financial condition, and cause the value of our common stock to decline, which may result in the loss of part, or all, of your investment. Our exclusive license to provide water to retail customers in the Cayman Islands is presently under renegotiation with OfReg, the Cayman Islands government utility regulatory authority, and we are presently unable to predict the outcome of these on-going negotiations. We sell water through our retail operations under a license issued in July 1990 by the Cayman Islands government (the “1990 license”) that granted Cayman Water the exclusive right to provide potable water to customers within its licensed service area.
In 2024, 2023, and 2022, we generated approximately 24%, 17% and 27%, respectively, of our consolidated revenue and 38%, 26% and 44%, respectively, of our consolidated gross profit from the retail water operations conducted under the 1990 license. The 1990 license was originally scheduled to expire in July 2010 but was extended several times by the Cayman Islands government in order to provide the parties with additional time to negotiate the terms of a new license agreement.
From that date through February 18, 2025, we continued to operate under the terms of the 1990 license, providing water services to the level and quality specified in the 1990 license and in accordance with our understanding of its legal obligations, treating those obligations set forth in the 1990 license as operative notwithstanding the expiration of the express extension.
We continued to pay a royalty of 7.5% of the revenue we collected as required under the 1990 license. In October 2016, the Government of the Cayman Islands passed legislation which created a new utilities regulation and competition office (“OfReg”).
OfReg is an independent and accountable regulatory body with a view of protecting the rights of consumers, encouraging affordable utility services, and promoting competition.
OfReg, which began operations in January 2017, has the ability to supervise, monitor and regulate multiple utility undertakings and markets.
Supplemental legislation was passed by the Government of the Cayman Islands in April 2017, which transferred responsibility for economic regulation of the water utility sector and the negotiations with us for a new retail license from the WAC to OfReg in May 2017.
We began license negotiations with OfReg in July 2017 and such negotiations are ongoing.
We have been informed during our retail license negotiations, both by OfReg and its predecessor in these negotiations, that they seek to restructure the terms of our license in a manner that could significantly reduce the operating income and cash flows we have historically generated from our retail license. Under the new regulatory legislation passed in October 2016, Cayman Water must first be granted a concession by the government before obtaining a new (or renewing the old) retail operations license.

and 18 more.

Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2024 ↗, FY2025 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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