Aug. 17, 2006 – With little discussion and no debate, the Water and Power Authority Governing Board gave the go-ahead Thursday to WAPA's executive director to reprogram funds and refinance bonds to cover the authority's immediate, emergency capital projects needs.
Alberto Bruno-Vega , WAPA executive director, had asked the board last week to call a special meeting to hear his plea for the reprogramming to complete work and/or installation on five electrical generating units on St. Thomas and St. Croix that Bruno-Vega said were critical to the authority's immediate power production needs.
The board also approved "maxing out" – as Bruno-Vega called it – the utility's capital line of credit by pulling the last $2 million from it.
In reprogramming the proceeds from the 2003 bond issue, $3.1 million will be pulled from the Randolph Harley Substation overhaul to fund repairs to Unit 22 and the Long Bay Substation on St. Thomas and to complete repairs and install Unit 17 on St. Croix.
Problems with both Unit 22 and Unit 17 have ended in disputes with Pratt and Whitney and General Electric respectively, but Bruno-Vega pointed out it could take years for settlements to be reached.
Meanwhile, he expressed concern about reprogramming the money for the Harley substation.
"We need to find monies somewhere in the future because this substation needs to be replaced." But in the meantime, he said, "If you don't have generators in place, you cannot transmit through the substation."
It has been WAPA's intent to use its own excess revenues to complete the projects on the generators, which also include Unit 10 on St. Croix and Units 12 and 14 on St. Thomas, but there aren't any excess revenues. The inability to recover the full amount of its fuel expenses from ratepayers and the V.I. government's sluggish payment of its utility bills have left WAPA $4.6 million "in the red" and it is unlikely that self-generated funds are going to be available anytime soon, Bruno-Vega said.
In the case of Unit 10, Bruno-Vega said he expects to recoup some money from an insurance settlement, but again when and how much remain unknown, and the needs for the unit to be back online are immediate.
Board member Alfonso Franklin asked, "Do you project that at some point we will be buying newer equipment?"
Bruno-Vega said, "Whenever we add generation we need to consider replacing old equipment, but the capacity is needed today." He said that in the long term additional capacity should not be dependent on fuel oil.
But where alternative energy sources are concerned, he said, "Any new generation that we bring on board will take two to three years; we need to survive the present to be able to reach the future."
What Bruno-Vega asked for and received from the board includes refinancing the 2003 electric bonds to bring in an estimated $11 million in new money from the difference in interest rates between 2003 and now. But that is not guaranteed, he said. The estimates are based on previous projections done by the authority's investment bankers.
It is unknown if WAPA will be able to refinance with the "cloud" of "under-recovery" and pending legislation that seeks to cap utility rates hanging over its head. The other unknown is if the difference in interest rates, which have been steadily rising, will actually yield the $11 million the authority is hoping for.
Nellon Bowry, WAPA chief financial officer, said the $11 million was "by no means a given."
And even if what Bruno-Vega called the "ideal scenario" were to happen, the authority would still be about $7.4 million short of what it needs to complete all the capital projects on the drawing boards.
One of those projects, the purchase of two waste heat recovery boilers that are estimated to save WAPA $30 million after only one year in operation, will have to be vendor financed and repaid with the savings. Originally the bond refinancing was slated to go for part of the waste heat recovery units, but that discussion was left for another day.
Meanwhile, the Harley substation project will be short $3.7 million and Unit 13, the workhorse that will need to come offline for repairs and maintenance as soon as the new units are installed and functioning, will be $10.4 below projected costs for a complete overhaul. This means the unit will have to be taken down twice, Bruno-Vega said, calling that move "contrary to all logical reason."
But given the state of WAPA's finances, Bruno-Vega said it was the only way the maintenance could realistically be done. And at that only if the best case scenario takes place.
Bowry said if all goes well and the projections are close to the $11 million mark, it would take three weeks to a month to have the cash in hand.
If WAPA is unable to refinance or the new money doesn't materialize as hoped for, Bruno-Vega told the board, "We will have to come back to you."
Along with Franklin, board members Claude "Tappy" Molloy, Ira Hobson, and Daryl Lynch, board chairman, were also in attendance.
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