Home News Local news WAPA Forced to Borrow $12M for Needed Capital Projects

WAPA Forced to Borrow $12M for Needed Capital Projects


Sept. 2, 2005 — $31.4 million owed to the Water and Power Authority by the territory’s government and citizens has left the utility without the cash needed to complete much-needed capital improvement projects. To facilitate the completion of the aforementioned projects, WAPA’s governing board approved a request from Executive Director Alberto Bruno-Vega Friday to borrow $12 million from both the utility’s water and electric lines of credit.
" There are a lot of things that we need to do that we’ve been postponing for years," Bruno-Vega said. " And since we haven’t been able to maintain our equipment, I have to say that we’re in bad shape at this time."
In addition to the $12.4 million owed to WAPA by the central government and its instrumentalities, Bruno-Vega explained that action taken by the Public Services Commission in order to protect the consumer from spiraling fuel costs has been detrimental to the utility’s operations. As WAPA’s regulating agency, the PSC has not allowed the utility to collect from residents all costs included in the Levelized Energy Adjustment Clause (LEAC) factor, causing a $19 million shortfall in funds.
"This money won’t be able to be collected from consumers for the next two years. In the meantime, we have to pay Hovensa for our fuel, and we have to complete our maintenance projects … this is the course of action we have to pursue," Bruno-Vega said.
Unfortunately, the use of credit line money — to be loaned by Banco Popular and First Bank — will have to be paid back within the next five years, with an annual interest-rate charge of $637,000. "The only way for us to be able to pay this back is if we recoup all the money owed to us by the government, or if we issue additional revenue bonds. However, if the government doesn’t pay, then WAPA goes into default — we’ll be in a lot of trouble if that happens," Bruno-Vega said.
$1 million from the water system line of credit and $11 million from the electric line of credit will be used to:
— fix St. Croix’s Unit 10 turbine;
— fund a new waste heat recovery boiler for St. Croix;
— repair units 12, 14, and 22 on St. Thomas; and
— build a new state-of the-art substation at WAPA’s St. Thomas plant.
This new substation will be replacing those units that splintered on the island earlier in August, resulting in a districtwide power outage (See "News Brief: Power Outage Blamed on WAPA's Crown Bay Plant".) While WAPA did borrow approximately $5 million from 2003 revenue bonds to update the aging facility, Bruno-Vega says that more is needed in order for the project to be undertaken.
Some credit line money will also be used to build a new substation in Long Bay, St. Thomas, that will supply power to both the Yacht Haven Marina and parts of the island. The cost-sharing agreement for this project was also approved by the board Friday, allowing WAPA to contribute $4 million, and Yacht Haven $2 million. The 10 megawatt substation will be built behind Barbel Plaza.
To ensure that the government repay money owed WAPA as quickly as possible, the board created and passed a mandate during the meeting which states that all agencies not current with their accounts will be disconnected within ten days if a payment plan is not immediately established with the utility.
This mandate will affect the departments of Labor, Police, Housing Parks and Recreation, Public Works, Planning and Natural Resources, and Property and Procurement; along with the V.I. Board of Elections, V.I. Territorial Emergency Management Agency, and the Office of Management and Budget.
The Education Department, after recently making a good-faith payment to WAPA, and the Gov. Juan F. Luis Hospital in St. Croix are excluded from the mandate. The hospital has also recently entered into an agreement with the utility in order to payoff its $9 million debt by Dec.1, 2009 — the first payment of $125,000 being due this coming Oct. 1. "We have to treat the government like any other customer. We can’t handle this debt anymore — we’ve reached the point of no return, where we have to borrow money just to survive."
Bruno-Vega advised the board that Standard & Poor’s, WAPA’s bond-rating agency, has cautioned the utility that its bonds may be placed on negative watch due to the utility’s inability to collect the $31.4 million government debt and deferred fuel-expense debt." The underlying rating is BBB-, while the insured rating is AAA," Bruno-Vega said.
In other action, Bruno-Vega told the board that a bill approved by Gov. Charles W. Turnbull earlier this week eliminates the street-lighting surcharge added to consumers' WAPA bills. Instead, the responsibility for the street-lights will go to the Department of Finance, with a 2 percent tax applied to real property tax bills (See "Senate Passes Low-Income Housing, Block Grants, Vendor Bills.) Additionally, the board approved:
— a payment to the PSC in the amount of $250,000 for assessments made for WAPA;
— $1.6 million for the installation of underground ducts and manholes from Hannah’s Rest Stop to Lagoon Street on St. Croix;
— $1.2 million for the purchase of cables and hardware for the project from Electrical Supply of Tampa, Fla., and $581,076 to Fortress Storage for the installation and splicing of cables;
— the renewal of the Employees' Health Insurance Policy with Cigna for one year at $2 million; and
— amended the language of WAPA’s personnel policy to permit the utility ten days instead of five to investigate violations of policies and procedures
Finally, Daryl" Mickey" Lynch, Cheryl Boynes-Jackson and Yolander Samuel Deterville were re-elected to the board on Friday.
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