June 26, 2008 — The V.I. Water and Power Authority is trying to pay off some of its old debts, but do to that they must borrow on a new line of credit from the bank, officials said at a WAPA board meeting Thursday.
Last month, WAPA's governing board approved a resolution to increase the authority's overdraft capabilities with FirstBank from $2.5 million to $5 million and to increase its electric system working capital lines of credit from $2 million up to $20 million — $10 million each at FirstBank and Banco Popular. On Thursday, WAPA officials wasted no time asking board members to allow them to draw down the funds, taking the entire $10 million from Banco Popular and another $8 million from FirstBank to pay off the $12 million WAPA currently owes on its existing line of credit.
The remaining $6 million would give the authority some extra working capital, but a large chunk of it will be put toward WAPA's outstanding fuel bill to Hovensa, which, as of Thursday, totaled about $10 million.
"This extra money would cover what we owed up till last week," WAPA Executive Director Hugo Hodge Jr. told board members. "Unfortunately, what's due to Hovensa is more now, but at least this will keep us current."
Though WAPA's fuel bill for May totaled about $24.8 million, its projected revenues for the month were about $24.4 million, Hodge said. Aside from trying to find the funds to deal with other expenses — such as employee salaries, debt service payments and health insurance costs — the authority also has to find a way to juggle its deferred fuel costs if oil hits $129 per barrel in July, he added. A recent Levelized Energy Adjustment Clause (LEAC) increase approved by the Public Services Commission would allow the authority to recover $121 per barrel, leaving WAPA to absorb the loss.
The request to draw on the authority's lines of credit was approved by the board, along with a request to extend WAPA's fiscal year 2008 budget for another two months to allow officials to trim about $6 million from an FY 2009 spending plan geared toward "meeting the authority's needs based on the revenues" it's getting, Hodge said.
"We've already done the bulk of the work — what we're dealing with now is strategizing on how to make it work," Bowry added. "The only problem is now we've gotten to a point where we're hitting muscle."
The FY 2008 budget approved by board members at the end of January showed a total $251.5 million in projected operating revenues on the electric side, but an end of the year net operating loss of about $2.1 million after expenses. On the water side, WAPA's financials show total operating revenues of about $36.4 million, and an end of the year net gain of a little over $4 million.
Since most of the money has been put toward fuel, the authority is currently running under budget in most areas, Bowry said after Thursday's meeting. However, a drop in sales on the electric side should result in a revenue decrease during FY 2009, he added.
"It seems like people are conserving more because of the high cost of fuel," he explained. "So that piece of the bill that actually goes to us is going to go down and we're going to have to figure out how we're going to pay for everything."
Though LEAC revenues are included in the authority's financial statements, all of that money is passed straight through the Hovensa, officials have said.
Earlier this month, Standard and Poor's Rating Services cut its outlook on WAPA's $195 million in outstanding senior and subordinate bonds from stable to negative. While this does not have an immediate effect on the authority, it could impact whether WAPA will be able to go back to the bond market in the future, officials added.
Meanwhile, board members also passed a resolution authorizing the authority to file its increases for LEAC rate increases on a monthly basis with the PSC. The resolution serves as a backup in case the commission does not approve WAPA's petition to reinstate the automatic LEAC, officials said Thursday.
Among the board's other action, it:
— authorized Hodge to extend the WAPA's contract with Ernst & Young for an additional year to perform an independent audit of the authority's financial statements for FY 2008;
— authorized Hodge to negotiate and execute a one year extension of WAPA's contract with HOVENSA from July 1, 2008 to June 30, 2009;
— authorized Hodge to enter in contracts with Comprehensive Security Services to provide security services for St. Thomas and St. John from July 1, 2008 to June 30, 2009 at a cost of $609,475, and to extend its present contract with Intel Security Services to provide security services for St. Croix for the period from July 1, 2008 to August 30, 2008;
— approved the purchase of approximately 19,000 feet of 15kV cables and associated hardware from Electric Supply of Tampa, Inc. for the federally funded Long Bay/Center Line Road underground project at a cost of $359,144;
— approved $241,131 to the Department of Planning and Natural Resources for payment of the 2007 Title V Emission Fees for WAPA's St. Thomas and St. Croix power plant facilities; and
— authorized Hodge to negotiate and purchase two acres of land at Beeston Hill, St. Croix, pending the rezoning of the land from R1 to R3, for the installation of a 10 million gallon water storage tank at a cost not to exceed $200,000.
Board members present during Thursday's meeting were Brenda Benjamin, Donald Francois, Gerald Groner, Noel Loftus, Robert Mathes, Sinclair Williams and Juanita Young.
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