The U.S. Virgin Islands Water and Power Authority board of directors approved long-term contracts for the building and use of solar and wind energy installations, which should cut the authority's costs and allow it to address some of its liabilities, its CEO said.
When the projects are completed in about two years, the authority hopes the new power sources will provide about 30% of the authority's electricity, WAPA CEO Andrew Smith told the board Thursday.
The contracts, which cover 25 years with a WAPA option for five more, set the authority's cost at 10.9 cents per kilowatt hour. The solar contract is fixed, but the wind contract and the authority's charge may go up by as much as 7% or down by as much as 4%, depending on circumstances, Smith said.
The solar and wind developing companies will pay to create the installations, with no WAPA borrowing, Smith said.
Smith hopes the cost of batteries to store the electricity will be paid by the federal government.
The planned renewable projects would substantially reduce the authority's operating costs, Smith said.
"The shift to wind and solar makes so much sense it shows how obstructionist politics can hold up progress," said Muni Credit News Publisher Joseph Krist said, . "The plan deserves support because it addresses both the power supply and financial issues (like pension payments). The willingness of the vendor to finance construction is good as well."
Fitch Ratings rates the authority's senior and subordinate bonds CC. WAPA has about $207 million in bonds, $341 million in long-term debt, and $1.098 billion in total liabilities outstanding.
Separately, Smith said the authority would next week make its final payment on the employee contributions it owes to the
The authority has not made its required employer contributions for many years, Smith said, adding they would resume when WAPA regains fiscal health.
Gov. Albert Bryan Jr. wants the Senate to approve a letter of credit to support government operations, payments for federally supported projects, and a potential settlement between WAPA and its former propane fuel supplier Vitol.
WAPA reached a preliminary agreement with Vitol to address the debt it owes the fuel supplier, Smith said.
WAPA is applying to "federal partners" to support a "buyout of Vitol," he said. The letter of credit would allow the authority to make interim payments to Vitol. Once a final deal is reached the federal government would pay off the authority's share of any money borrowed against the letter of credit as well as the amount owed to Vitol.
From an accounting perspective, Smith said, WAPA's obligation to Vitol was its largest liability, and addressing it was an "absolutely critical path" to "fixing WAPA."
"The proposed letter of credit and reliance on federal help is … problematic," Krist said. "The obligation to Vitol remains uncertain and the federal role in paying back any letter of credit draws are problematic under current conditions in Congress."
