Gov. Charles Turnbull has apparently left the door open for the employees of the V.I. Water and Power Authority to make an offer for the utility. But exactly how genuine an offer that is has Hubert Turnbull, the chairman of the WAPA Buy-Out Committee, somewhat skeptical.
In a Sept. 27 letter to Hubert Turnbull, who is also president of the WAPA Employees Association, the governor requested that the Buy-Out Committee, made up of the utility’s employees, submit a purchase proposal by this coming Friday.
In the letter, the governor noted that some WAPA employees have been working with "professional advisors" to develop a purchase plan.
"As I have stated before, the government has an obligation to consider any proposal that would ensure better service for the ratepayers of the Virgin Islands at lower rates, while guaranteeing the government a better return on its investment and protecting the legitimate interests of WAPA’s employees," Gov. Turnbull wrote.
He went on to say that he would welcome a proposal by Oct. 20 that includes a detailed acquisition term sheet, a detailed financing term sheet from a reputable financial institution, proposed governance provisions for any successor entity, a regulatory structure to ensure reasonable rates and proposed performance standards to ensure improved service.
While Hubert Turnbull termed the governor’s letter as "nice," he said the Oct. 20 deadline was unrealistic.
"It’s hard for us without having what Southern Energy had," Hubert Turnbull said, referring to Atlanta-based Southern Energy’s months-long due diligence period in which the company had full access to WAPA’s books.
The ensuing offer made by the company was to purchase 80 percent of the government-owned utility for almost $400 million, including $105 million in cash up front. The deal also included approximately $2 million in economic development funding provided by the company and writing off the government’s $20-million plus in over-due utility bills.
Hubert Turnbull said the WAPA Buy-out Committee has already lined up a lender and could realistically purchase 49 percent or 51 percent of the utility, depending on the amount of control wanted by the government, "for the same lump sum Southern Energy was talking about."
An employee buyout could also be combined with a cooperative ownership plan that would see WAPA managed by members of the community.
But whatever scenario develops, Hubert Turnbull said employees would need to conduct a feasibility study. The union leader said the employee group already has a commitment from the U.S. Department of Interior to fund such a study "to find out exactly where we need to go."
But the employee buy-out committee needs the governor to sign off on a study before Interior releases funding. The governor has yet to acknowledge that request, even though it would be at no cost to the government, Hubert Turnbull said. He added that the government already paid two private consulting firms approximately a half-million dollars for similar studies.
"We’re trying to see whether or not the governor is serious about having the Department of Interior fund a feasibility study," Hubert Turnbull said. "There’s nothing that says we can’t buy half the authority" or buy the authority through a combination of an employee stock option and cooperative.
The governor’s lack of response concerning the Interior-funded feasibility study has Hubert Turnbull wondering whether the letter requesting a purchase proposal was just a formality intended to force employees to draw up a hasty offer that wouldn’t be acceptable to the administration. That in turn could be a way to reintroduce Southern Energy back on the scene.
"I’ve heard too many rumors to discount it," Hubert Turnbull said. "I honestly believe the governor is trying to see about a buy out before bringing Southern Energy back."
Although Southern Energy’s offer was rejected by the V.I. Senate in August, the company continues to look for utilities to purchase in the Caribbean. Last month, the Jamaican government signed a memorandum of understanding with Southern Energy that gave the terms of future negotiations and gave the company exclusive rights to conduct due diligence through the end of December. In that proposed deal, Southern Energy has two months days to offer a price for the Jamaica Public Service Company.
Like the scenario in the territory, the Jamaican government would use the sale proceeds to help balance its budget.
Supporting the employee buyout plan are Michael Shay and Andrew Torgove. Shay, a partner in a mainland consulting firm, and Torgove, a New York attorney, both have experience in helping arrange financing for employees to become owners of their companies.
A cooperative would likely be managed by a board of 11 people –– four from WAPA, four from the business community and three residents –– and then secure loans from the National Rural Electric Cooperative Association, known as NRECA, and the Cooperative Finance Corp., or CFC.
Residents interested in joining the WAPA coop would pay a minimal fee and essentially become an owner of the new utility. Once it was purchased, they would have a say in how it is managed, including voting for members of the board of directors.
Through national associations, the coop would have access to low-cost capital, management expertise and storm insurance, among other things.
Cooperative ownership of electrical utilities in the U.S. dates back 64 years. Cooperatives now own 930 utility systems in 46 states and serve some 34 million customers, 12 million of whom own a share of the utility from which they receive their power, according to the NRECA.
