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WAPA On Increasingly Shaky Financial Footing

May 22, 2009 — A growing budget shortfall at the V.I. Water and Power Authority is hurting the utility's debt ratio, which has caused ratings agencies to place a "watch" on the utility's status as the key figure is pushed toward its allowable limit.
The utility has a current budget shortfall of $4.9 million, said Maurice Sebastien, WAPA's assistant chief financial officer, at the regular monthly meeting of WAPA's governing board Friday. Of that, $3.4 million is from declining water and power usage — both from conservation and from slowing economic activity. The remaining $1.5 million shortfall is due to the V.I. Public Services Commission not having granted WAPA's request for a base rate increase, he said.
The debt-coverage ratio is WAPA's yearly operating income divided by the total amount of all interest and principal paid on all of its loans. The bigger the number, the better the financial condition of the company, and the more credit-worthy it is considered. (See: "WAPA Could Default on Bonds Without Rate Increase.")
Right now, the ratio on all bonds on the electrical side of the utility is 1.15, exactly at the limit for electrical bonds, Sebastien said. Any more deterioration could hurt the creditworthiness and bond rating of the utility.
WAPA petitioned the Public Services Commission to review the water rate last April, and would bring up the issue at the next hearing of the PSC, said WAPA Executive Director Hugo Hodge Jr.
In other business, the board authorized WAPA to negotiate with FEMA to offset and settle some disputed claims over the cost of repairs after Hurricane Hugo in 1989. The board authorized contracts for the overhaul of two gas turbine generators, plant security, work on the Harley electrical substation project on St. Croix and repairs to the fueling dock at St. Croix's power plant in Estate Richmond, and several other expenditures.
All votes were without dissent. Board members present were Brenda Benjamin, Juanita Young, Donald Francois, Gerald Groner, Noel Loftus, Housing, Parks and Recreation Commissioner St. Clair Williams; and V.I. Department of Planning and Natural Resources Commissioner Robert Mathes.
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