Energy supplier cuts off Virgin Islands WAPA
An energy supplier to the two northern U.S. Virgin Islands
cut off service in response to the local utilities’ failure to pay it, in what
analysts say is a sign of continuing financial stress at the utility.
APR Energy’s electrical generators provide backup
electricity the Water and Power Authority power plant on St. Thomas. Both APR
and WAPA generators provide electricity to St. John as well as St. Thomas.
Other generators provide electricity to St. Croix.
APR said Tuesday, “Unfortunately, WAPA has not made its
contractually required payments for many months.” APR said it would stop
providing electrical service Wednesday afternoon.
“We are hopeful that WAPA will quickly pay their past due
invoices and APR Energy can resume power generation,” APR said.
Frequent power outages have plagued the Virgin Islands over
the last year. For example, in December there were 167 outages affecting 59,034
customers and 111,013 customer hours, according to WAPA statistics. This is
despite the fact that December is outside of hurricane season.
Moody’s Investors Service Vice President Kathrin Heitmann
noted that recent reports that "the Virgin Islands Water and Power
Authority (VI WAPA) has failed to make timely payments to its contractor APR
Energy highlight the authority’s unsustainable capital structure with
insufficient liquidity to manage working capital needs. This will likely
negatively impact the reliability of the territory’s electric system as well.
“We continue to rate VI WAPA’s senior electric system
revenue bonds at Caa2 and the subordinated electric system revenue bonds at
Caa3 with a negative outlook,” Heitmann said. “These ratings reflect a high
probability of default and the risk that VI WAPA could fail to meet its debt
service reserve fund requirements and future debt principal amortization in the
future without additional liquidity resources.”
As of December WAPA had $178 million in bond debt
outstanding.
Fitch Ratings Managing Director Dennis Pidherny said the
decision by APR was a “little unexpected” because in January the islands’
Public Service Commission approved a base rate increase for WAPA. This was
supposed to bring in about $30 million per year. Pidherny said he was unsure
whether the authority had been able to start collecting the additional money
yet.
While a little unexpected, the APR decision isn’t surprising
given WAPA’s financial problems, Pidherny said.
On Tuesday WAPA released a statement that said, “Executive
Director Lawrence J. Kupfer sought to reassure residents of St. Thomas and St.
John that the actions by APR Energy will have no effect on WAPA’s ability to
provide continuous electrical service. ‘We are in position to utilize our
propane-fired generators for the bulk of electrical capacity required, and we
have both Units 14 and 23, which are owned by the authority, available to close
the gap left by APR’s suspension of service.’”
On March 3, Virgin Islands Gov. Albert Bryan said in a video
interview on the VI Consortium web site, “Two things keep me awake at night:
WAPA and GRS [Government Retirement System].” The retirement system is
underfunded and many have said it will run out of money within the next two or
three years without additional funding.
Bryan said WAPA was in a bad situation. However, he said
WAPA had a needed loan “lined up. It’s a matter of doing the paperwork to
finalize everything. We need to change some legislation to get it done but we
anticipate that will be done in [the] next 60 days or so.”
Fitch Ratings rates the authority’s bonds at CCC. In
explaining this rating in December, Pidherny pointed to the authority’s
inability to pay its financial obligations on time, lingering effects of the
2017 hurricanes on demand for electricity, and its very weak liquidity. He also
said the authority had “sizable maturities” of bonds due in 2020 and 2021.
WAPA owes former oil supplier Trifigura Trading $25 million.
Trifigura has gained a legal ruling against the authority for the sum.
It gets fuel oil from Glencore Ltd. According to VI
Consortium, and WAPA owes Glencore $10 million. Glencore is considering ending
its relationship with WAPA because its demand is too small to make it viable
for Glencore, the site reported.
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