Fuel supplier Vitol, which is still waiting for the VI Water and Power Authority to pay $160 million in outstanding bills for the propane conversion project, sent a letter to Gov. Albert Bryan Jr. on Monday, asking for payment directly to the government VI.
Ryan Grillo, a spokesman for Vitol, said in an email on Friday that the proposed 2023 budget presented by new WAPA CEO Andy Smith “fails to service Vitol’s debt. Vitol finds this unacceptable and, therefore, sent a letter to Governor Bryan.
Grillo provided a copy of the letter to the Daily News, in which Vitol Chairman and CEO Ben Marshall asked for Bryan’s help in the “untenable” situation, and said the company was concerned that WAPA makes no effort to pay their huge bill. .
“At this time, the Water and Power Authority has no comment,” according to an email from Nyomi Gumbs, WAPA’s acting director of corporate communications.
On Friday, Government House communications director Richard Motta Jr. did not respond to a Daily News request for comment.
When the project began in 2013, the conversion from fuel oil to liquid propane gas, or LPG, was touted as a major cost-saving program that would make power generation in the territory cheaper and more efficient.
But over the next few years, the original $87 deal soared to more than $200 million, “including the Council’s construction cost limit of $160 million,” and other fees and costs, according to a report by the Office of Inspector General VI on WAPA’s management of the Vitol Contract, which was published in November 2021.
The audit was initiated by the VI Public Utilities Commission, which asked the IG to “review Vitol’s justification for expanding the scope of work and nearly doubling the cost of the project,” according to the report.
But the Inspector General found WAPA responsible for skyrocketing project prices, and said board members and management had taken shortcuts and rushed processes, prioritizing speed over cost.
“Specifically, they agreed to waive detailed engineering plans, which would have delayed the project for two years,” according to the report.
Instead of doing an initial engineering design, or “FEED” study first, “they allowed Vitol to carry out a FEED study, design the storage terminals, purchase equipment and construct the project facilities. simultaneously,” according to the Inspector General’s report.
“For years, we have endured the litany of gratuitous complaints that the cost of the LPG project exceeded initial expectations, although WAPA embarked on this project without completing the FEED study necessary to develop a mature specification”, according to Vitol’s letter. to Brian.
Marshall said Vitol warned WAPA that “everyone should reasonably expect project costs to increase,” according to the letter. “However, Vitol has no influence, control or even visibility over how WAPA chose to present the project’s initial cost estimates to its own regulators.”
He added: “It is telling that the 2021 report from the Office of the Inspector General of the Virgin Islands states that the WAPA board knew that the start-up costs of the project were “grossly insufficient” and that the board planned and expected the initial costs of the project to increase significantly,” according to the letter. “Vitol should not be held responsible for WAPA’s failures to keep its regulators and USVI stakeholders informed when project scope and costs have increased as expected.”
WAPA still hasn’t paid Vitol even for the original project cost of $87 million, which Marshall says is “particularly frustrating because funds were raised by WAPA from USVI ratepayers to recoup its investment in infrastructure, but these amounts collected have not been paid to Vitol”.
He likened the situation to WAPA’s failure to pay contributions to the government employee pension system, including employee contributions that were deducted from WAPA staff paychecks and used to pay other expenses.
“Although less often advertised, despite WAPA’s continued obfuscation, Vitol has always worked – and continues to work – in good faith with WAPA to better serve USVI residents,” according to the letter. “Yet in the five years since the facilities were commissioned, WAPA has shown little interest in supporting a lasting and holistic solution to even begin paying the substantial debt it owes Vitol.”
Marshall cited Government VI assistance in providing $12 million to subsidize WAPA, and Bryan’s “leadership and support” in helping WAPA purchase a leased production unit and pay previous lease payments for 10 .6 million.
“Now our project needs such critical support,” Marshall wrote.
“Despite WAPA’s recent thinking to the contrary, power generation in the USVI will be anchored in its LPG generation assets for years to come,” he added.
Less than 10% of the territory’s generating capacity came from renewables in 2020, “and that capacity contributed only 2% of the electricity consumed”, according to the letter, and it will take years to develop infrastructure solar.
In the meantime, “WAPA will have to use Vitol’s LPG facilities” and will have to pay for them, Marshall wrote.
“WAPA’s efforts to ignore its contract and avoid its obligations send the wrong signal to USVI’s stakeholders, including its residents, creditors and investors, as well as to relevant policymakers in Washington. Vitol wishes to work in good faith with your administration to put an end to this litigation.
Marshall concluded his letter by requesting a meeting with Bryan.