EVENT: GWR GLOBAL WATER RESOURCES CORP 2011 FIRST QUARTER RESULTS CONFERENCE CALL

1 EVENT: GWR GLOBAL WATER RESOURCES CORP 2011 FIRST QUARTER RESULTS CONFERENCE CALL TIME: 01H00 E.T. REFERENCE: CNW GROUP LENGTH: APPROXIMATELY 36 MINUTES DATE: MAY 12, 2011

2 OPERATOR: Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the GWR, Global Water Resources Corp, 2011 first quarter results conference call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to cue up your questions. If anyone has any difficulty hearing the conference, please press *0 for operator assistance at any time. I would like to remind everyone that this call is being recorded on Thursday, May 12, 2011, at 1:00 PM Eastern Time. I would now like to turn the conference over to Carmel Rodriguez, Director of Communications for Global Water Resources, Inc. please go ahead then. CARMEL RODRIGUEZ (Director of Communications for Global Water Resources, Inc.): Good afternoon everyone, and thank you for joining us on today's call. Yesterday afternoon we issued our 2011 firstquarter financial results by press release and a copy of those results is available on our website at www.gwfathom.com. Speaking today are Trevor Hill, President and Chief Executive Officer and Cindy Liles, Executive Vice President and Chief Financial Officer. Mr. Hill, will summarize the key events of the first quarter, and provide his insight into the remainder of 2011, then Ms. Liles, will review our financial results for

3 Q1 2011, then both Mr. Hill and Ms. Liles will be available for questions. Before we begin, I'd like to remind you that certain information presented today may include forward-looking statements. Such statements reflect the company s current expectations, estimates, projections, and assumptions. These forward-looking statements are not guarantees of future performance, and they are subject to certain risks, which could cause actual performance and financial results to vary materially from those contemplated in the forward-looking statements. For additional information on these risks, please read the company's March 25, 2011 annual information form, under the heading risk factors. Unless otherwise stated, all amounts discussed are US dollars. As we discussed during last quarter s conference call in 2010, Global Water Resources coordinated the formation of GWR, Global Water Resources Corp. which we will refer to today as the company. A Canadian company organized to hold equity invested interest in the US based company Global Water Resources, Inc. referred to today as Global Water. I will now turn the call over to Mr. Trevor Hill. TREVOR HILL (President and Chief Executive Officer): Thank you Carmel. Good afternoon everyone. Let me begin by saying, that I am very pleased with where Global is today in all respects. The first quarter was

4 about transitioning Global into a well funded, high-growth, technology focused company and readying ourselves for the wave of change and opportunity that is coming to our particular niche in the water sector. To that end, we have accomplished a great deal. We were so financially constrained in 2010, that we had neither the resources nor man power to fully take advantage of opportunities we saw unfolding in the marketplace. But that all changed during this first quarter. Not only do we begin to see the material positive impacts of our 2010 rate decision for all are regulated utilities, but the benefits of restructuring our balance sheet and eliminating more than $70 million in debt, has allowed us to achieve both very strong growth and very strong cash flow, in fact more than sufficient cash flows to meet all our investing needs both in CAPEX for our regulated utilities, but also that necessary investment and intellectual property, which is the cornerstone of our FATHOM offering. In the first quarter, we generated more than $3 million EBITDA, or about $0.18 per equivalent share. Global Waters is a company founded on the premise of the certainty of future water scarcity and leading the market in both innovation and the adaption and adoption of these technologies and methodologies that conserve water has defined global since its inception. We also know that water prices everywhere are going up and the function of aging infrastructure,

5 power costs, water treatments and scarcity. When prices go up, consumers having been conditioned by Apple and bank institutions and others, demand more information. FATHOM puts real-time water consumption data in customers hands and it is this demonstrated capacity that is so enticing to the municipalities that we are serving, California and other regions. It is this pioneering effort in FATHOM that both sets our intellectual property apart, but also gives us a dominant lead in the emerging Smart Grid for water sector. The FATHOM business continues to wrap nicely. During the first quarter, we launched a focused marketing campaign into California where the FATHOM drivers are the strongest. A program designed to touch every municipal decision-maker 10 times within the quarter and to establish Global FATHOM as the expert in the field of back office solutions tied to Smart Grid. We hired a national sales organization and not only trained our entire FATHOM team, but also put in place the processes, systems, and scripts which allow us to make the marketing, inside sales and selling processes scalable and replicable. By the end of the quarter our selling team was making 8 to 10 presentations a week to municipal decision-makers, finding their pain, introducing them to the technologies that both manage their water resources but perhaps more importantly, save them money. These meetings invariably set into motion

6 a process which moves municipalities from not believing that the technology could work or is affordable, to believing that under FATHOM they can have it all: A fully financed turnkey implementation guaranteed to work and hosted by Global, a trusted utility. This market-making process had led to the construction of a phenomenal pipeline of opportunities and the very best of these will contract in 2011. During the three months ended March 31, our FATHOM business continued to build on the momentum that we started in 2010. In Q1 we completed the customer information system or CIS for the city of Torrance, California and made substantial progress towards completing the automated metering infrastructure, AMI, an (inaudible) management implementations for the city of Covina. During the period we also contracted with the city of Grass Valley for the procurement of all three FATHOM product lines and began executing on the related contract implementation. CIS for Grass Valley is already live. Additionally during the quarter, we contracted with the city of Covina who came back to us for additional implementation services. We now run their back office and customer service from our call center in Phoenix. In the previous quarter we disclosed specific details about the number of FATHOM contracts and the relative stage in development and

7 these numbers as a result of the marketing and sales process described above, have become materially larger since our last report, to the extent that we concluded that they will no longer have the meaning they previously had, and may even become difficult to contextualize. Instead however, I can tell you that I remain extremely bullish on the quality and quantity of deals in the pipeline. There have been no departures from our white-hot list and we have grown the entire pipeline another 16 percent just in the last six weeks since I reported to you. There are many new qualified entrants in the prospecting phase of the pipeline, and as word of our successful implementation reaches more potential customers, we feel confident our (inaudible) will only continue to increase. I remain impatient only with the speed of conversion of municipal clients, but delighted with the processes, systems and structures we built around this business, and continue to brace for and prepare for the projects we expect in the near term. Over the next two quarters you will see us adding inside sales resources, doubling down our focus in California and readying new territories in the Southwest US for FATHOM. Frankly, my recent focus has been on readying the implementation teams and ensuring that we have the processes and systems in place to scale and replicate the delivery of the product, and the revenue recognition that goes along with FATHOM

8 offering. And now turning to our regulated business. Arizona's population is forecasted to grow by 1.5 percent in 2011 and nearly 2 percent in 2012; twice the national average of 1 percent. Interestingly, house prices appear to be stabilizing in Phoenix and the area continues to rank very high on the US affordability index, in fact second only Las Vegas in the nation. Our regulated water utility growth is directly tied to the housing market. Vacancy rates in our service territories have steadily declined since January 2009, with this quarter seeing our lowest vacancy rate since the summer of 2008. Arizona job growth has once again begun, seeing its first gain in growth in the last 12 months as compared to the previous 24. In our regulated business, our year-to-date growth has been very robust. Through April 30, active service connections increased at 39,148 or 5.4 percent annualized growth for the year so far. We continue to believe that Global is well positioned to attract a proportionately higher portion of the new service connection that other areas may see as a function of our fitted infrastructure. We have capacities today for 88,000 search connections and the affordability of houses in our regions. Additionally, we expect incremental revenue growth over the near term will be primarily fueled by the new rates provided through the 2010, regulatory rate decision. The long-awaited ICFA workshop will be held at the end of June at the ACC.

9 We remain optimistic that this process will yield some measureable results and allow us the opportunity to use this tool in areas where regional planning and small water company consolidation is necessary. At this stage, we believe we have a wide support for the adoption of ICFAs as a tool to be used for these purposes within Arizona Corporation Commission. Finally, in the first quarter, we favorably settled three important disputes: One resulted in a gain of $80,000.00 dollars and voided the potential future infrastructure capacity obligations. The second one allowed the company to be reimbursed another $400,000.00 dollars for infrastructures installed in 2007, and the third dispute related to an outstanding acquisition payment with a requirement to pay that expired. After arbitration, we were able to cancel a $3.2 million dollar letter of credit. You will remember the company received a 47 percent increase when the Arizona Corporation Commission established new rates for six of our utilities last year. Retroactive to August 1st, including a phase-in of rates for one of our utilities. As of January 1, 2011, with the second of three phases complete, the company is now invoicing for 7.5 million of the 9.6 million awarded in that rate decision.

10 I will now turn the call over to Cindy, who will discuss our first quarter offering results. Following Cindy s remarks, we will be able to answer any questions anyone might have. Cindy. CINDY LILES (Executive Vice President and Chief Financial Officer): Great. Thank you Trevor. Since the financial information of the US company Global Water is not consolidated with the public company, our discussion today refers to the consolidated financial information of Global Water. As a reminder, unless otherwise stated, all amounts discussed are in US dollars. Consolidated revenues for the three months ending March 31, 2011, totaled 9.5 million compared to 6.8 million for the same period in 2010. Excluding revenues related to the sale of nonrecurring stored water credits, consolidated revenues increased 107 percent to 9.5 million from 4.6 million for the three months ending March 31, 2010. Consolidated net loss of the three months ending March 31, 2011, totaled 1 million compared with a net loss of 56.6 million for the same period in 2010. The larger net loss reported for the three months ending March 31, 2010, primarily reflects the impact of a nonrecurring charge totaling 55.2 million, resulting from the outcome of the 2010 regulatory rate decision. Excluding this nonrecurring charge, the net loss for the three months ending March 31, 2010 totaled 1.4 million compared to the 1 million in 2011. As Trevor

11 mentioned earlier, the first quarter is our lowest quarter for water consumption. The lower water consumption combined with the fixed cost including depreciation in interest, is the driver for the net loss for the first quarter. Global water uses a non-gap measure adjusted EBITDA to analyze operating performance. Adjusted EBITDA is calculated based on operating income less depreciation, amortization and other nonrecurring items. Please see the table included with the press release to obtain reconciliation from net loss to adjusted EBITDA. Adjusted EBITDA for the three months ending March 31, 2011, totaled 3.2 million, an increase of 111 percent compared to 1.5 million in the same period in 2010. The improvement in adjusted EBITDA is primarily driven by the combination of our growth in our FATHOM business, the income derived from a sale of certain contractual rights, and a higher rate we can now charge pursuant to the 2010 regulatory rate decision. I will now discuss specific information into our two businesses and I will start with the unregulated business. So, in regulated revenues for the three months ending March 31, 2010, increased 19 times to 3.2 million for the three months ending March 31, 2011. FATHOM revenues increased 12.2 times to 2.1 million during the same time. With the addition of the Grass Valley contract in February of 2011, we have now signed 10 long-

12 term contracts with six utilities in two states for the provision of FATHOM services to date. We expect to realize aggregate implementation fees under these contracts of 7.3 million and aggregate recurring fees following implementation of approximately 1.8 million per year. Approximately 1.9 million of the contracted 7.3 million implementation fees were recognized as revenue during the three months ending March 31, 2011, with the remaining 2.3 million expected to be recognized as revenue over the second and third quarters of 2011. Revenues from the regulated water utilities business for the three months ending March 31, 2011, increased 1.7 million or 39 percent from 4.5 million in 2010, to 6.2 million in 2011. Revenues rose in our water utility business as a function of both the rates we can charge customers and increases in active service connections. We report utility service connections by total service connections and active service connections, with active service connections excluding the vacant homes in our area. Total service connections increased by 52 to 42,731 from 42,678 as of December 31, 2010. Active service connections increased by 552 to 39,000, 2011 as of March 31, 2011. This was compared to 38,459 as of December 31, 2010. This increase represents an annual growth rate of 5.7 percent from the first quarter. The increase n active service connections for the first quarter of 2011 included 9 percent

13 from new meter installations, but 91 percent from vacant accounts reconnecting through our system. I will now pass the call back to Trevor. Trevor: Thank you Cindy. This concludes our prepared remarks. We are now available to answer any questions that anyone may have. OPERATOR: At this time, I would like to inform everyone, in order to ask a question, please press star then the number one on your telephone keypad. Your first question comes from the line of Robert Catellier from Clarus Security. ROBERT CATELLIER: (Clarus Security): I have a couple of questions about the sales cycle that you mentioned being the point of frustration. I wonder if you have had any success managing and streamlining that process with your customers. You know, at the very least, we can describe the utility sale cycle as long, if not erratic. Have you had any success recently streamlining that decision-making process with your customers?

14 TREVOR: Hi Rob. Yes. You know, I think it is as you say frustrating is a good choice of words. When you sit with these municipalities, and I have actually been out on a few sales calls this quarter, what you see is a keen interest in reducing costs and streamlining their organization and adopting the tools we have. There is no issue as far as do they want it, is there a market need, is that need growing. Those things are simple. Is it unique in the marketplace, do we have a commanding lead, we are totally comfortable with these things. What invariably happens is we end up working with the cities to figure out how they can acquire. There has been a couple of, during the downturn; municipalities have come under a lot of scrutiny. So, on the one hand they have less resources to play with. On the other hand, they are under more scrutiny in how they use public funds, and what we are finding is the cities that historically have said hey, we are going to do this and go with you guys and said, you know, we talked about it and we are going to put together a little RFT with you guys and send it out in two weeks; and you know, oftentimes we see that those things are written exactly around the FATHOM offering, so you would say good news, but what it adds is time to the cycle and then and its really a little bit of covering themselves from a risk and liability litigation perspective. Some of (inaudible) seen are very very difficult for anyone

15 else to even compete with, and so it feels positive, but we feel like we are tuning this process as you say to make it as streamlined as possible. That is why I am so bullish on this business and why my focus is so much on implementation now, but frustrating in that dotting the I s and crossing the T s and making sure that, you know, that no one loses their job inside the city during the decision-making process remains the focus of our sales acceleration methodology focus. ROBERT: And so, in addressing that, then it seems to me like the use of reference customers, particularly within the same state would be, you know, a pretty effective weapon for you. Have you had any success with that approach? TREVOR: We really have. You know, we have hosted some meetings for other cities at Covina and Torrance this month. That has generated some positive activity including the production of a couple R fees in some cases, like oh, I want that, how I get it sort of thing, and so, yes to that. If you could see that the level of activity, and I have said this before and I remain bullish on it, you would be excited as I am. It is hard for me to

16 communicate back in a meaningful way to you so that you can quant the change, but I urge a little patience, it is coming. ROBERT: And just on that subject, I know this is a little bit of a forwardlooking question, but did you have a sense I think the last time we were on the call; the sense of timing was like Q2 and Q3. Do you have any updates on that timing? TREVOR: Yes, you know, I still I think that is right Rob. What we remember that last time we talked about the seasonality of decision making. We have been inside the budgets of a large number of cities for the last 60 days. I can tell you that in several cases, we know for sure that FATHOM is now an integral part of their budget that will be approved at the end of June, and what we expect is that through this period of budget approvals and entering into a new year, we expect some flurry of activity. ROBERT: Okay, and just, if you could elaborate a little bit on your R and D in this and of the inside sales that you are adding. I am just curious as to if there is any change to what you previously envisioned, ie, can we

17 expect more expense in 2011, and what impact that might have on your financial statement. TREVOR: Let me answer the first question first. On the R and D side, what we see for sure is where this market is going. I think it is worth saying that when you look at Smart Grid for power, what you find is that the biggest utilities, and there is only a couple of dozen of them on the power side, have quite sophisticated Smart Grid software and technology and even some realtime presentment to customers. The reason they do is primarily because these bigger utilities already have sophisticated backoffices and they can handle the data volumes, and in many cases those utilities are standing those processes up themselves. But in the water industry, highly fragmented, 50-60,000 private water companies versus a few dozen of power companies. Because of that, you find hundreds of desperate customer information systems and we also find a lack of IT technology in these companies. So, they are not running enterprise systems in most cases like a SAP. They are running a hodge-podge of home-made or outdated legacy systems, and so in order for realtime presentment to get to the smaller sector, you have to have a hosted platform; and what we are finding is, that premise that we founded

18 FATHOM on, is definitely true. We absolutely know that the varied entry for Smart Grid realtime presentment for the technology guys and others, is the fact that these cities have no ability around that and those technology companies have no hosting ability, or ability to run these systems, and so that is the niche that we are playing it. So, to that end, we are investing in those structures and processes that both brings home to Global, certain processes that we have outsourced in the past related to the billing and remittance management pieces, but also enhancing and making investments in enhancing the product offering that will ultimately flow all the way through to the consumer hand. So remember, we have got two distinct customers in this business: the municipality that we contract with, but ultimately the interface with the customer, which of course is going to be all powerful in the future. And, to that end, what I see happening is water management tools in customers hands and getting to those customers in meaningful ways will be a whole new source of revenue as we go forward, and that is where I am focusing the (inaudible) investment. So, on the expense side, on that particular item, not really. We are making some capital investments, Rob, on that side, but that does not really affect the expense side of the equation. Now, flipping over to the inside sales side, we are finding on that side is that inside sales guys, to train them and

19 get them ready to make..remember, we are making right now hundreds of outbound calls from Global into these new areas every month. So, you know, we are for sure the only person in this sector making outbound calls to municipalities from an inside sales group. We are doubling down that process now in California so that we can touch every municipal decisionmaker in California directly this quarter, and what you will see is that we will bring on inside sales guys and train them now and have them ready to send up some new inside sale outgoing call campaigns by the third quarter so that we can be ready, as I mentioned in my last call, to begin standing up some new regions by the end of this year. So yes, to that end, we will be adding some sales resources just because we can see where the attraction is now, are excited about it, and I really do not want to miss any opportunities, and frankly, I want to take advantage of the leadership position we have. ROBERT: Okay, thanks for that. My last question then has to do with the contract disputes, and I am sorry if you have gone over this, but you know, you settled the ones that you mentioned here. I wonder if there were any other disputes outstanding.

20 TREVOR: Yes, there is one other one outstanding. I would really put it in a frivolous category to be honest. This is a legacy contractor that worked with one of our utilities prior to the acquisition in 2006. They made a couple of claims vis-à-vis, work that they had historically done and that is ongoing. There is some bit of disclosure around that in the audit, but nothing has changed on that and I hope to bring that into resolution in the next couple of quarters. ROBERT: Thank you. OPERATOR: Again, if you would like to ask a question, please press start then the number one on your telephone keypad. Your next question comes from the line of Marko Pencak of GMP Securities. Your line is open. MARKO PENCAK (GMP Securities): Thank you. Good afternoon. A couple of questions. Is it possible for you to split out the EBITDA from your regulated business from your FATHOM business for us?

21 CINDY: Hi Marko, this is Cindy. Thanks for the question. What we tried to do this time, was get more into a business division discussion. So you will notice on page 16 of the company s MVNA, where we tried to take the next step towards that, and we have given you regulated, unregulated, other categories in a way that you can back into EBITDA. I can also, I think I have given you enough visibility to show you the margin, the gross profit margin on the implementation business and I think what you will see coming soon, is where we can take it further and give you a margin on the recurring portions of FATHOM; it does become more meaningful. MARKO: So as an approximation, if I look at that, to get to EBITDA, I mean, I can just take the operating income, add back the depreciation, and then I presume I have to subtract for that the 1.1 million in contractual rights that you have recorded? In revenues? CINDY: Exactly. MARKO: Okay, thank you. My second question is for Trevor. Thank you for the description of the nuances relating to the fail cycle. I guess my question would be, given how you have described the process, I mean, it

22 strikes me it offers therefore, very few parts of that sales process where you can actually take action to influence it. In other words, I appreciate the activity in terms of broadening the funnel and all the rest of it, but once you get them to a critical stage; it is really I am presuming there is not much more you can do to actually accelerate the process. Is that fair or am I missing something that you can still influence the timing of the process? TREVOR: Yes. So, I do not think it is quite fair. I will tell you why. So, you have got to appreciate that this is not like selling, like you know, a car with a million potential customers, and some number of those million customers know about the car, want to buy it, and it is simply a matter of convincing them. This is market making, right? So, in many cases the municipalities do not understand that they can have this technology. So really, our selling process is enabling the market to understand they can have it and as a function of that process, we are creating RFP requests that would have not existed. So, in many cases this quarter, we have responded to RFPs that would in no way would have existed but for our efforts. So it is not like these guys are all out there just wondering whether they are going to get this and then do it. They are saying Oh I see, I did not think I could have that stuff because I do not have any money, and I do

23 not have any IT department. It looks cool, but I just thought I was disqualified. Now they are saying Ah, you guys will host this and finance this and run it for us to make it meaningful, and tools in customer hands? Okay, we want that. How do we get it? That is most of what our sales guys are doing. So MARKO: Right, but if you qualify (inaudible), I think you call it your white hot list or something. I mean, once it goes through made that determination. Um, I guess from that point forward, you are just subjected there (inaudible). Or is there anything else you can do to accelerate that. TREVOR: Yes, you know there is. Um, you know, I have pulled into the municipal sector a long time and I have seen guys, you know, one thing people say is can you influence the decision makers, go to the council people right? And, start to go political on these guys. But, here is what is interesting. Sometimes you could accelerate the process that way. I have certainly done it myself. The trouble is that you have to; in this business we are dealing with staff every day. Okay? We are handling their essential billing, and these are long-term contracts. Remember, these are 10 and 15-year contracts and zero attrition. They are so sticky, it is crazy. So

24 what you have to think about is, do you want to burn any bridges by accelerating the process, or do you want staff to come to the recognition themselves, realize that they are not any good at this process, which takes some soul searching, then move the whole process to us, and then we have it essentially forever. And, I have been very direct with our sales team, who are asking the same questions as you. Why cannot we go political on these guys (inaudible)? I have been resistant of that because I think you win with staff, you win the day forever. So, in my mind we are doing the things that bring staff to the decision on their own, which leads to these sticky contracts and I think we are being very successful in that way, but have not wanted to pull out the other tools that some people may talk about. MARKO: Okay. Thank you. You have mentioned that the increase in your inside sales staff and how you are going to train them through Q2 and then, you know, they will start selling in Q3 and thereafter. My question is what is the model or the form of their compensation prospectively. Are they going to be straight commissioned, salary, or a combination?

25 TREVOR: Yes, it is one of the things we are standing up right now. Historically in 2010, we had really no tailored compensation for these guys. Now, the process I can tell you in rough terms, about 50 percent of their pay will be some sort of base pay or draw. Of the remaining 50 percent, about half of that for the inside sales guys will be based on making meetings and running them through our qualification process, which is very strict now, and then the final 25 percent will be based on closed deals closed profitable deals. So, it goes to the margin piece. MARKO: Thank you. Right. Last question from me, page 20 of your MDNA, you present a schedule which is your contractual obligations for the current year. My question really revolves around the acquisition obligation of 11.9 million. Um, in, you know, I guess my question really is, is that 100 percent firm that is going to have to be paid in 12 months, or is that sort of a sort of worse case sort of scenario, and what your intention is in terms of financing that obligation. TREVOR: First answer first. It is an obligation of the company. I do hope to be able to restructure a portion or all of that by next year. We have had some success over the last couple of years restructuring elements of that.

26 So, um, you know, that is a worse case piece. The second piece is, we really think we can manage that with cash flows for the business. Um, right now it is in our projection, cash-flow projection, we see no issue in being able to achieve it. MARKO: Okay, thank you. OPERATOR: Again, if you would like to ask a question, please press star then the number one on your telephone keypad. There are no further questions at this time. I turn the call back over to the presenters. TREVOR: Okay, thanks everybody for your time this morning. I appreciate it. Cindy and I of course, are always available at any time if there are further questions or you want more insight than we have been able to provide this morning. Thanks again, and we look forward to speaking with you soon.

27 OPERATOR: This concludes today s conference call. You may now disconnect. *****