WAPA board approves deal to retire $285M liability

The U.S. Virgin Islands Water and Power Authority Board of Directors voted 3 to 2 to approve borrowing from the territory's government to retire a $285 million liability.  

The authority also voted 3-1 to approve a deal with the entity it owed the money to, Vitol, to pay off the debt at a reduced rate.

Earlier this month WAPA Chief Executive Officer Andrew Smith said retiring the liability at a discount would allow the authority to take an important step on its road to financial health. 

With the WAPA board's approval of the promissory note, the local government has agreed to issue a $100 million letter of credit with $45 million to be used to make an initial payment due to Vitol on Saturday. WAPA owes Vitol $285 million, but the company will settle for $145 million.

WAPA owes Vitol, which supplies the authority with propane and has built some infrastructure for it, for propane infrastructure Vitol built several years ago.

WAPA, under the deal, would receive ownership of propane storage facilities, allowing it to use more propane as opposed to the more expensive diesel fuel it sometimes uses to make electricity.

WAPA Chief Financial Officer Jacob Lewis said the authority was applying for federal aid and expects it will be able to use these funds to pay back the $45 million to the territory's government and pay off the remaining $100 million.

In December, Fitch Ratings cited WAPA's dispute with Vitol over the capital lease obligation and Vitol's decision in November to stop supplying WAPA with propane for downgrading the authority's senior bonds to CC.

WAPA has about $207 million in bonds, $341 million in long-term debt, and $1.098 billion in total liabilities outstanding.