WAPA brings in diesel after propane cutoff

BY SourceMedia | MUNICIPAL | 11/30/22 02:59 PM EST By Robert Slavin

U.S. Virgin Islands Water and Power Authority officials said they have arranged for a diesel fuel shipment to make up for the loss of propane, its predominant fuel source, after its supplier cut it off for unpaid bills.

On Tuesday afternoon the authority said it had arranged for the shipment of diesel after WAPA's supplier of propane, Vitol, in mid-November said it would no longer be supplying the authority because of outstanding debts it was owed.

In recent years propane has been 80% of the fuel supply. Vitol said one of the power plants it supplied would run out of fuel Wednesday, and the other propane plant would run out Friday.

The diesel the authority has acquired will be used at older power plants and "as the older generation units in operation are overdue for maintenance, this may add to its unreliability upon the transition," WAPA said.

At Wednesday's WAPA meeting, its chief executive officer Andrew Smith said electrical production by diesel costs twice as much as it does it by propane.

At Wednesday's meeting the WAPA board of directors unanimously approved Smith's request for temporary authorization to purchase propane from one of three possible alternate suppliers. Smith said WAPA had been paying $380,000 to $400,000 a day for propane from Vitol but that he wanted authorization to spend up to $500,000 per day for propane because of the possible higher prices. The board authorized the amount.

Following Smith's request, the board's authorization is good through Jan. 6. He said WAPA's fuel situation should be clearer by the board's next meeting, which is scheduled for the end of December.

The board spent 2.5 hours in executive session on Wednesday to discuss personnel or legal matters. No further information was available about the topics.

According to a WAPA posting to the EMMA web site, as of April 30 WAPA had $205 million in bonds outstanding and $2 million in unamortized bond premiums. It had $341 million in long-term debt and $1.098 billion in total liabilities.

"The authority asks for the community's understanding during this transition as all attempts are being made to ensure there are no territory-wide rolling blackouts and that our most vulnerable communities are prioritized," the authority said in a statement.

In mid-November the authority had said there would be rolling blackouts if it could not arrange for alternate fuel supplies.

Gov. Albert Bryan Jr. is spending this week visiting four U.S. senators and Deputy Secretary for the U.S. Housing and Urban Development Department Adrianne Todman. Among the topics to be discussed are WAPA and the rum cover over payment, the Office of the Governor said in a statement.

On Nov. 18 U.S. Virgin Islands Del. Stacey Plaskett said she was in discussions with Bryan, WAPA, and U.S. Rep. Frank Pallone, chairman of the House Committee on Energy and Commerce, concerning how to help WAPA. Plaskett is the Virgin Islands' non-voting representative in Congress.

Moody's Investors Service (MCO) rates WAPA's senior electric system revenue bonds at Caa2 and the subordinated electrical system revenue bonds at Caa3. The outlook is negative. Fitch Ratings rates the bonds CCC.

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.