Oct. 18, 2001 – After months of rough riding, the Water and Power Authority negotiations over the administration's plans for a $180 million gasification plant to process the territory's solid waste hit a solid roadblock Thursday.
At WAPA's monthly board meeting, Claude A. "Tappy" Molloy made a motion to throw the Caribe Waste Technologies proposal out the front door without further ceremony. Seconded by G. Luz James Sr., the motion failed on the vote because the other board members present wanted to hear further comment from Joseph Thomas Jr., WAPA executive director, in executive session.
It was decided that further negotiations with CWT will be acted on at a board meeting on St. Croix next week, board chair Carol Burke said after the session. "We will decide where we are and where we want to go," she said. No date has yet been set for the meeting.
WAPA and CWT, the company leading a group of firms proposing to finance, build, own and operate the waste-to-energy gasification plant, have been in negotiations since June trying to work out a contract for WAPA to purchase power and water from CWT that will be produced by the gasification plant.
The Turnbull administration selected CWT earlier this year to be the provider for the territory's solid waste plant, but the agreement is contingent on WAPA buying electricity and water — something the utility's management has said it doesn't need — from CWT.
WAPA is a major part of the picture because its purchase of the water and power could reduce the government’s costs by about $11 million to $12 million a year over the 30-year contract, according to CWT's president, Mark Augenblick. That, he said, would leave the government with payments of about $25 million a year. Augenblick has said that amount could likely be funded by federal grants and a solid waste disposal "user fee."
Thomas and Augenblick clashed from the start over the issue of "avoided costs" — the amount of money WAPA would otherwise spend to produce the same amount of energy and water that CWT is proposing to sell it.
"We've had a problem from the moment they walked in the door," Thomas said Thursday. "They told us the avoided costs would amount to $800 million over the 30-year life of the contract." In July, both entities agreed to hire consultants to determine the avoided costs. Stone and Webster Consultants of Boston came up with the figure of $360 million. "That's $440 million more than they quoted me, and from my back-of-the envelope calculations, I think it's closer to $100 million — so we could have paid more than $700 million if we had taken the first figure," Thomas said. "They are currently in trouble with me."
At a special meeting last week, the board heard reports from Stone and Webster and another consulting firm hired separately by WAPA, Skadder Arps, of Washington, D.C. It was decided that the two firms needed to recalculate the avoided costs and work with WAPA and CWT attorneys to draft a new purchase agreement which would address several protection and reliability issues advised by Skadden Arps.
One sticking point throughout the negotiations has been the lack of need for the water and power CWT would produce. "About 10 to 15 years down the road, WAPA will need to add capacity," Thomas said. "Adding it now is carrying unused capacity."
At Thursday's board meeting, Thomas said WAPA is now in good standing in the bond market and has an "unqualified" audit. "If we brought them even an excellent contract with CWT, they would ask 'What for? You don't need the water, and you don't need the power.'"
One board member remarked, "It would look like the V.I. government dragged WAPA kicking and screaming into something they don't want."
Thomas read the board a report he said he had received Wednesday from Napoleon Nelson, director of Public Financial Management, WAPA's financial advisers. Nelson's report cites a Hoover's Online data report and the Securities and Exchange Commission filing form for Interstate General Co., IGC, which is the parent company of CWT.
"For calendar year 2000, IGC reported total revenues of $3 million, a net loss of $3.9 million, and $18.3 million in net worth," the report states. Nelson wrote Thomas, "Obviously, these are modest financials to back a $200 million project."
Nelson said IGC makes its money from land holdings. "Its long-term success depends on development of solid-waste projects … which require substantial capital," the report states.
Thomas said he had meetings with the consultants and CWT officials last week in Washington, D.C., and both consulting firms need three to four more weeks to complete their studies. So far, the negotiations and studies have cost WAPA about $200,000, he said, and he foresees at least another $200,000 before an agreement, if any, is reached.
Molloy expressed the view that "we have spent valuable time and money. I am totally turned off." CWT, he said, was "less than honest with us. It will turn out being a big embarrassment to us."
Fellow board member Alphonso Franklin said, "I tend to agree. They are leading us down a path that will lead to trouble."
Thomas reminded the board that CWT has a big investment in the project, deferring further remarks to the executive session.
Board members Burke, Franklin, James, Molloy, William Lomax and Andrew Rutnik, Licencing and Consumer Affairs commissioner, attended the meeting. Attorney General Iver Stridiron, J. Arthur Downing and Ira M. Hobson, Housing, Parks and Recreation commissioner, were absent.
