Torched by Tough Interview Questions, WAPA’s Chief Executive Flames Out

At the start of August, WAPA’s Andy Smith sat down for the Big Interview with local USVI media…  

Local press in the U.S. Virgin Islands grilled Andy Smith, CEO of the territory’s Water and Power Authority, on his lack of transparency, management skills, and poor financial management of his flailing public utility. For viewers that tuned in hoping to get clarity out of this notoriously opaque public utility, they were left sorely disappointed. By the interview’s conclusion, it was clear Andy Smith’s hour-long appearance left more questions than answers.

As we noted in advance of Andy Smith’s sit-down with the V.I. Consortium, we urged the CEO to “come prepared,” and yet, he avoided some of the most important questions about the future of WAPA.

At other times, it was clear that Smith wanted to avoid getting into certain details, especially why the four Wartsila generators are still sitting idle, the continuous blackouts and why the rush to solar.

Smith’s Wartsila Story Doesn’t Add Up

More than two years ago, the U.S. Department of Housing and Urban Development (HUD), through the Community Development Block Grant program, forked over, at least, $75 million to buy four Wartsila generators.

Yet, today, these generators sit in the USVI, inoperable.

Why?

These generators, some of which have been on the islands for months, are not yet connected to the Vitol-run Liquid Propane Gas system. The project was supposed to be completed and operational by the spring of 2022, but WAPA has instead continuously pushed that target back. 

When asked during the interview, Smith gave a confusing answer that WAPA “have been working with Wartsila to get the generators online faster.”

That can’t possibly be fully accurate, and Mr. Smith knows it. Smith’s comments do not add up, and raise more significant questions: Why will it take another 6 months or longer to hook up the generators? Why would FEMA/HUD approve funding for generators that do not fit with existing facility?

These generators are sitting idle waiting for integration. Taxpayer money is being wasted because WAPA did not require, and FEMA/HUD either were not aware or turned a blind eye to the fact that these generators are not compatible day-one with the existing Vitol facility.

USVI: Unsafe Place to Invest 

WAPA’s inability to repay its bills in a timely manner is a warning to investors who may be considering putting their capital on the line in the USVI. Over the last several years, WAPA has made the conscious decision to either delay or simply not repay creditors, their bank loans, leases, and more.

For example, in June, news broke that because WAPA wasn’t paying its bills for the use of a power generator, and was forced to rely on a faulty back-up unit that ended up causing a major power outage. WAPA had been leasing the regular generator, Unit 27, from GE for $731,000 per month. WAPA reportedly missed payments worth $5.4 million to GE for their use of Unit 27, so GE turned the generator off.

Not even financial institutions who have loaned WAPA money are spared. At a hearing before the Legislature, their CFO Jacob Lewis said of their payments to two Puerto Rican banks “we’re not in a position to repay them at this point in time, on a quarterly basis.”

As bad as this scenario is, it pales in comparison to the $160 million owed to Vitol, the Houston-based energy company that constructed the -run Liquid Propane Gas system on island. The facility constitutes a big improvement for the island’s energy sector, as it powers the grid reliably and affordably compared to other sources of energy. WAPA has consistently failed to meet contractual obligations to the company.

Fitch ratings notes that the USVI’s power provider will undoubtedly need external financing to meet some of its payments. Now with Ernst and Young advising WAPA on cash management – at FEMA’s expense – it is unclear who won’t be getting paid next.

WAPA Wants Biden’s FEMA to Fill up the Tanks

In his interview with the VI Consortium, the CEO admitted that their fuel tanks are close to empty. As is typically the case with Andy Smith, he wants someone else to lay out the cash and pay the cost.

Rather than pay the estimated $30 million cost to get these tanks filled, Smith is in talks with the Federal Emergency Management Agency to foot the bill. It’s his belief that FEMA will pay for it because, “it is very dangerous to have empty tanks during Hurricane season, so there is a case to be made for disaster mitigation funding.”

Smith argues that FEMA should fill their tanks under the rationale of mitigation resilience, but this is nothing more than a ruse to simply get more funding from federal taxpayers. From WAPA’s perspective, they view this situation as nothing more than an opportunity to have someone else pay the expensive tab.

Demanding the federal government waste tens of millions of taxpayer dollars, especially with already record levels of debt, is totally fiscally irresponsible. This is no way to run a public utility company responsible for nearly 100,000 customers.

Conclusion

Perhaps if Mr. Smith and WAPA had been transparent about the operability issues with the Wartsila generators earlier, the fuel subsidies would not have been needed.

TPA would like to see more transparency, and better management from an organization that has had billions of taxpayer dollars funneled into it. We expressed our concern over a lack of oversight of these funds in a letter sent to Congressional leaders in June, and these concerns have only been confirmed since. WAPA’s chief executive may say he is being open and transparent, but his actions are far from it.