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HomeNewsLocal newsFuel Supplier Takes WAPA to Court for $24.6 Million in Overdue Bills

Fuel Supplier Takes WAPA to Court for $24.6 Million in Overdue Bills

Commodity company Trafigura Trading LLC, which once supplied the Virgin Islands Water and Power Authority with all of its No. 2 fuel oil, has filed a complaint in District Court against WAPA alleging that the semi-autonomous entity has failed to pay an outstanding balance of almost $25 million for oil deliveries.

WAPA’s latest contract with Trafigura for the delivery of fuel oil began in March 2015, although Trafigura’s corporate predecessor, TAG, had been the authority’s fuel oil provider since the close of the Hovensa Oil Refinery in 2012.

According to documents filed in court on Tuesday, WAPA still owes “a sum of no less than $24,644,426.82” for deliveries made by Trafigura under the 2015 contract, which expired on its own terms in June of that year.

Trafigura began threatening legal action in October 2015, saying WAPA had until Oct. 23 to pay its debt.

In a letter sent to Trafigura’s legal counsel that same month, WAPA’s then executive director Hugo Hodge Jr. acknowledged the authority’s obligation to pay, but requested more time to propose a manageable payment plan. Hodge wrote that WAPA had “regrettably encountered difficult financial challenges, beyond its control.”

Trafigura, in its complaint, said no payment plan was ever proposed. WAPA chose not to extend Hodge’s contract in January 2016, and the authority’s chief financial officer, Julio Rhymer, took over as acting chief executive officer shortly thereafter.

When its contract with WAPA expired, Trafigura declined to do any more business with the authority until its outstanding bill was paid. WAPA then entered into an oil supply contract with another commodity trading company, Glencore PLC.

On Feb. 25, 2016, WAPA’s supply contract with Glencore was extended through June 2017, although by then WAPA expects its need for fuel oil to be miniscule thanks to the completion of its propane conversion project.

Trafigura said in its complaint that WAPA should not have secured a new contract with another supplier before paying for fuel already delivered.

The company also suggested that not all avenues were explored by WAPA in its attempt to pay its debt. Trafigura cited a law, Act. 7028, that states, “The governor of the Virgin Islands … may take any action necessary to assist [WAPA], including without limitation, executing appropriate documents necessary for the government to provide a guarantee to support a line of credit for the authority in meeting its fuel costs.”

A more urgent question raised by Trafigura was why the V.I. government did not use more of the $220 million received from the sale of the Hovensa oil refinery to pay down its own debt to WAPA. According to information presented at a 2015 budget hearing last September, the V.I. central government owed WAPA more than $42 million as of July 2014.

WAPA only received a fraction of that amount from the Hovensa sale, and that money was earmarked for the government’s outstanding streetlight bills.

Before Trafigura took its complaint to court, the company sent one last letter to WAPA’s board chairman Gerald Groner on March 3.

“We are writing to you because it is possible that you and other members of WAPA’s Governing Board and officers of the PFA and Office of Management and Budget are not aware of the magnitude of the amount owed to Trafigura, which has the secondary deleterious effect of reducing the pool of bidders on the next fuel supply contract,” the letter reads.

As of Tuesday, Trafigura said it had received no response from WAPA.

When reached for comment Wednesday, WAPA spokesman Jean Greaux said, “WAPA does not comment on matters that are the subject of ongoing litigation.”

Greaux said WAPA is “very much aware of its outstanding obligation to Trafigura for past shipments of oil products to the territory’s power plants.” He said while WAPA has not been served with the contract lawsuit, “We have been made aware informally of Trafigura’s filing with the court and look to the day when this matter can be resolved in an amicable manner.”

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