WAPA Has the Solution, But Can It Get the Financing?

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Monday was not a good day for Virgin Islands Water and Power customers – eight electrical feeders on St. Croix went down and nine feeders on St. Thomas went off line causing service interruptions to 31,000 customers.

WAPA has a plan to bring, in the words of spokesperson Jean Greaux Jr., “generation stability” to the islands, but it has a problem. It needs $85 million to do it.

Last November the governing board approved revisions to its generation plan. The revisions called for the purchase of six generating units. Each of those new units would be in the seven-megawatt range. Previously one large 23-megawatt generator and three smaller generators were considered for purchase.

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But since that approval WAPA has been beset by what could be called financial setbacks. When Moody’s downgraded WAPA’s bond rating in January it said, “The rating action is prompted by growing pressure on VI WAPA’s financial prospects in light of the authority’s direct exposure to increasing economic and financial stresses in the U.S. Virgin Islands and an inability to disconnect itself from local economic conditions, including the continued slow payment pattern and weak financial profile of governmental customers and a very high adjusted net pension liability (around $220 million.)”

The Virgin Island government has also had its bond ratings downgraded and has been rebuffed twice when trying to make a bond sale.

Greaux told the Source Wednesday that there was “no lack of interest” being shown by Wall Street in a bond sale for WAPA.

“All options are on the table,” he said.

The Wall Street Journal, in an early May article, said WAPA was working with IFS Security of Atlanta to make the sale. However, the lead paragraph gave a negative cast to the effort. It said, “The Virgin Islands public utility is asking Wall Street to finance upgrades to its energy infrastructure as unpaid bills pile up and conflict with its regulator escalates.”

WAPA officials have been telling residents for years what the above national reports indicate – slow payment of government bills and an adversarial stance with the Public Services Commission are hurting WAPA financially.

Forbes magazine in January said the only thing between the U.S. Virgin Island and the financial disaster that has hit Puerto Rico is that investors have not yet given up on the Virgin Islands paying its debt.

Gov. Kenneth Mapp signed into law in March “sin tax” measures aimed at reducing structural deficits. The measures are intended to help the government raise funds for government agencies and to reassure markets that have downgraded V.I. debt and are not lending to the territory.

Meanwhile, WAPA has fallen further in debt. Last week news sources raised the specter of the islands going dark because VITOL had quit supplying WAPA propane because of $24 million bill. Greaux said that was an overblown issue. He said the switch to diesel fuel was an operational issue and WAPA had plenty of diesel fuel on hand. He added that VITOL was fulfilling its contractual obligations by keeping an 18-day supply of propane fuel on St. Thomas and 15-day supply on St. Croix. He did say that disagreements between VITOL and WAPA on invoices and contractual matters existed but they would be “resolved.”

WAPA has also been sued by Trafigura, the company that supplied WAPA oil several years ago and says WAPA owes it more than $24 million. Reports indicate that the case might be close to resolution. Greaux would not comment specifically on the case. He did say, “We will abide by what the court rules. We will pay our debt like we always have.”

The two territorial hospitals owe WAPA a total $20.5 million as of April 30.

According to a press release from WAPA, this is how the outages on Monday unfolded:

“Eight electrical feeders on St. Croix fell off line around 10:45 a.m., affecting more than 15,000 customers when Unit 17 tripped. Plant personnel brought Unit 20 on line and once the power plant was stabilized, service was restored to all customers. All feeders were back on line by 12:11 p.m.

“Later in the afternoon on St. Thomas, at about 2:34 pm, Unit 18 tripped, causing nine feeders to fall off line affecting service to just over 16,000 customers. … Full power restoration was experienced at 4:29 p.m.”

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