WAPA Addresses Cash Flow Challenges with New 6-Month Fuel Contract Before Hurricane Season

The Water and Power Authority (WAPA) has proactively taken steps to ensure a steady fuel supply by approving a six-month contract for a land-based fuel source, aiming to circumvent the potential disruptions in sea freight deliveries that hurricane season might bring.

At the heart of this strategic move is the recognition by Kevin Smalls, WAPA’s Director of Production, of the need for a safety margin in fuel supplies at the Estate Richmond power plant. Under normal circumstances, the plant operates efficiently with a seven-day fuel reserve. However, the unpredictability of hurricane impacts, such as blocked sea channels by sunken vessels or debris, necessitates a two-week fuel reserve to maintain operations without interruptions.

The board sanctioned a contract with SOL Petroleum, capping expenditure at $4.78 million for the procurement of approximately 25,568 barrels of ultra-low-sulfur diesel. Additionally, a trucking contract will supplement this arrangement, incurring costs just shy of $129,000.

Maurice Muia, the latest addition to the board, inquired about the feasibility of maintaining a 14-day fuel reserve. In response, Mr. Smalls elaborated on the financial impracticality of such a reserve, highlighting the significant opportunity cost – around $3 million – that holding the extra fuel would entail for WAPA, especially amidst its current financial duress.

Andrew Smith, WAPA CEO, echoed the sentiment by emphasizing the utility’s dire financial constraints, which limit its ability to opt for what would otherwise be a straightforward approach to storm risk mitigation: stocking substantial fuel reserves.

The current fiscal situation of WAPA, described by Mr. Smalls as the most severe cash flow crisis in his four-decade tenure at the utility, has led to discussions among board members about generating revenue through the resale of some of the procured fuel.

To counter the threat of hurricane-induced tank damage, a novel yet financially constrained solution was proposed: filling the tanks to at least three-quarters capacity with “station water” to maintain their integrity, considering WAPA’s inability to stock all its tanks with fuel, given its extensive storage capacity of 125,000 barrels.