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HomeNewsLocal newsWAPA’s Bond Downgrade Affecting Solar Project Financing

WAPA’s Bond Downgrade Affecting Solar Project Financing

Wanting to take a “second look” at the contract details, V.I. Water and Power Authority board members postponed voting on a six-month contract extension that would have given St. Croix Solar extra time to secure financing for a pair of solar facilities that officials said could be, if the money comes in, completed within a year.

The authority is currently under two power purchase agreements with St. Croix Solar and St. Croix Solar II, which officials said would facilitate the construction of two 3-megawatt farms on  St. Croix. The project has been delayed because of the company’s inability to secure all of its financing, which WAPA Executive Director Julio Rhymer said Wednesday is due in large part to the downgrading of the authority’s bonds in July and the potential risk for investors.

In July the credit rating agency Moody’s Investor Services lowered the rating of WAPA’s bonds to Ba3, what investors consider a "junk bond" rating.

“Based on our financial outlook, it becomes a little hard for third parties with power purchase agreements to actually finance these projects,” Rhymer explained, adding that the company is “actually pretty close” and should be ready to move forward within the next six months.

If not, the power purchase agreements could then be terminated, he said.

More than the financing, board members said they were concerned about the contracted rate per kilowatt-hour, 13 cents, that the company would be paid once power production is in full swing. While some members said the rate should be “floating,” or adjusted based on market prices, others said a move to a floating rate would keep investors from getting the returns they expect.

While Rhymer said the company anticipates securing the financing by the end of January, board members said they were still concerned and delayed acting on the extension for now.

The board also approved:

– two contracts for emergency and supplemental maintenance for WAPA’s facilities. The contracts each total $350,000. On St. Croix, WAPA has contracted with Vivot Equipment Corp., while Patrick Charles Enterprises is the contractor selected on St. Thomas.  The one-year contract allows for the continuous operation of the authority’s facilities in any situation where labor levels become shorthanded or when additional manpower is needed during emergencies.

– funding for Arcadis Inc. to continue providing air pollution compliance consulting and engineering services. The work of the company directly relates to the Environmental Protection Agency consent decrees the authority is under for its power plants on St. Thomas and St. Croix. The approved funding totaled $600,000.

– funding totaling $997,920 to Teledyne Monitor Labs for professional and technical services. The company’s work will be spread out over three years for continuous emissions monitoring services at both power plants. The services are mandated by WAPA’s consent decrees with the EPA and by local air permitting regulatory agencies.

Funding was also approved through the end of January for the continued storage of a no longer needed piece of generation equipment at a facility on the mainland.

Board members raised concern that WAPA continues to assume storage costs for the heat recovery steam generator that was originally purchased to be used with Unit 23. The authority’s integrated resources plan has determined that the combined cycle unit operation no longer fits the utility’s future business model. The board’s action requires Rhymer to fast track either a sale of the steam generator or to have it scrapped so as no long incur additional storage costs.

Board members attending the meeting were Chairwoman Elizabeth A. Armstrong, Vice Chairman Noel Loftus, Secretary Juanita Young, Gerald T. Groner, and Cheryl Boynes Jackson, along with Gustav James and Devin Carrington. Board member Marvin Pickering was excused.

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