March 27, 2008 — Looking for a solution to its cash flow problems, the V.I. Water and Power Authority is expanding its potable water system in hopes of bringing in new customers located on the East End of St. Thomas and St. John.
On St. Thomas, the new lines extend from the top of Raphune Hill and will eventually run up to the V.I. National Guard armory in Frydenhoj. The network is also planned to connect into an existing undersea pipeline that will channel water from the Randolph Harley Plant on St. Thomas to various areas on St. John.
The system should be in full operation by the end of April or beginning of May, WAPA officials said Thursday at a board meeting held on St. Thomas.
With St. Thomas hoteliers having already expressed interest in tapping into WAPA's added presence on the East End, officials said they are anxious to diversify their customer base and start generating some much needed extra cash to meet ever-rising fuel costs, critical repair needs and revenue requirements laid out in covenants between the utility and its bond counsel.
Currently, WAPA has to pay off an annual $3.8 million debt service requirement on water revenue bonds floated in 1998, according to Maurice Sebastien, WAPA assistant's chief executive officer. For every dollar the authority shells out for debt service payments, it must retain $1.25 in net revenues on the water side, he added.
WAPA was unable to meet that requirement during fiscal year 2007 and currently needs to generate another $116,000 within the next two to three months to satisfy the requirement for FY 2008.
"It takes a small amount of shift, either in revenues or expenses to make that gap up," added Nellon Bowry, WAPA chief financial officer. "I think we can do it within the next few months, but we don't want to miss the bar two years in a row for sure."
While Sebastien said the utility should meet revenue requirements set for the electric side, he reminded board members that WAPA is currently paying $97.66 per barrel of oil this month — about $5 less than the authority had projected when it calculated the current increase in Levelized Energy Adjustment Clause (LEAC) rates. That means, Bowry said, that the authority is presently not recouping enough money to eat into its deferred fuel costs, which was estimated at one point to total some $22 million.
Meanwhile, work is moving ahead on the construction and installation of St. Croix's waste heat recovery boiler, which is anticipated to save WAPA — and ultimately taxpayers — $1.6 million to $1.8 million per month once it comes on line. Efforts are under way to overcome some recent delays, keeping WAPA as close as possible to its original September 2008 launch date, according to Hugo Hodge Jr., the authority's new executive director.
"Working with the project manager, we have already found six to eight weeks' worth of fluff that we can cut off and save some time," Hodge said.
Last year, WAPA closed on a $57.5 million bond issue to cover the cost of the boiler and other repair projects for its plants on St. Thomas and St. Croix. However, any major delays in the installation process will keep WAPA from producing a portion of the revenue needed to pay off the debt service on the bonds, Hodge added.
However, efforts to get St. Thomas' waste heat boiler back online are moving ahead on an accelerated track. Hodge said the boiler should be back online in July — five months ahead of schedule.
WAPA board members on Thursday also:
— approved a $30,000 contract with Buck Consultants LLC to explore the option of having WAPA join the V.I. government's health insurance plan (board members said Thursday that WAPA would have to pay an additional 30.24 percent during fiscal year 2009 if it continues to pay 100 percent of its employees' insurance premiums);
— authorized Hodge to purchase the authority's property insurance policy through Theodore Tunick & Company at a premium rate of about $2.2 million for March 31, 2008 to March 31, 2009; and
— approved a $374,690 contract with Turboserve Corp. to perform major repairs on the Unit No. 16 gas turbine located at St. Croix's Richmond power plant.
Board members present during Thursday's meeting were Brenda Benjamin, Donald Francois, Alphonso Franklin, Kenneth Hermon, Cheryl Boynes-Jackson, Noel Loftus and Juanita Young.
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