SHAL­IZA HAS­SANALI

As part of its at­tempt to pre­vent fur­ther black­mail, the be­lea­guered Wa­ter and Sew­er­age Au­thor­i­ty (WASA) is ex­plor­ing an op­tion to pur­chase the De­sali­na­tion Com­pa­ny of T&T (De­sal­cott) as a way of writ­ing off its mul­ti-mil­lion-dol­lar debt.

The con­fir­ma­tion came from Pub­lic Util­i­ties Min­is­ter Mar­vin Gon­za­les af­ter the Cab­i­net Sub-com­mit­tee ap­point­ed to look in­to the op­er­a­tions of WASA in its re­cent re­port ad­vised cash-strapped WASA that the util­i­ty can ex­tri­cate it­self from the con­trac­tu­al agree­ment with De­sal­cott by ex­er­cis­ing its right to pur­chase the Point Lisas plant.

Gon­za­les who chaired the com­mit­tee ad­mit­ted to Guardian Me­dia that the ini­tial 20-year con­trac­tu­al agree­ment be­tween WASA and De­sal­cott was one of the worst de­ci­sions made un­der then prime min­is­ter Bas­deo Pan­day.

He said the coun­try was as­sured that wa­ter pro­duced by De­sal­cott would not have en­tered the do­mes­tic grid but used specif­i­cal­ly for the Point Lisas In­dus­tri­al Es­tate.

“To­day, 20 mil­lion gal­lons of wa­ter pro­duced by De­sal­cott en­ter in­to the do­mes­tic grid. That arrange­ment alone brought WASA to its knees be­cause the coun­try has to pay De­sal­cott US$7 mil­lion every month for wa­ter. This is an al­ba­tross around the necks of tax­pay­ers.”

He said these pay­ments have “de­stroyed and sunk WASA.”

Gon­za­les said when the Peo­ple’s Part­ner­ship came in­to of­fice the con­tract­ed was ex­tend­ed to 2036.

He said there is a pro­vi­sion in the con­tract “that af­ter a cer­tain time” the state can pur­chase De­sal­cott’s plant.

“I in­tend to look at that op­tion and see or not if it is fi­nan­cial­ly fea­si­ble so I can go back to Cab­i­net and see what we can do to short­en the life span of that con­tract. If we have to in­voke a pro­vi­sion in the con­tract to buy the plant... per­haps we might have to do it. That is the on­ly op­tion.”

The Gov­ern­ment, Gon­za­les said, would have to get an in­de­pen­dent eval­u­a­tor to val­ue the plant which would pave the way for ne­go­ti­a­tions and pur­chase it.

Gon­za­les said every week De­sal­cott threat­ens to ramp down pro­duc­tion be­cause the gov­ern­ment has not been pay­ing its bills.

As of Jan­u­ary 31, Gon­za­les said WASA owed De­sal­cott US$30.5 mil­lion or (TT$210 mil­lion).

“Two days ago I got a mes­sage they ramp­ing down to ze­ro.”

The Gov­ern­ment, he said has a re­volv­ing loan with banks to pay De­sal­cott.

“It is just un­sus­tain­able. “

When De­sal­cott de­creas­es its vol­ume of wa­ter, Gon­za­les said parts of Cen­tral and South Trinidad suf­fer for the es­sen­tial com­mod­i­ty.

“Some­times they have re­duced the pro­duc­tion of wa­ter be­cause the State is not pay­ing its bills on time. Most time we are late on pay­ments.”

Gon­za­les agreed that these threats to ramp down pro­duc­tion was one way of “hold­ing the coun­try to ran­som. It is black­mail...per­haps whitemail. How much mon­ey the peo­ple of this coun­try paid to De­sal­cott? I un­der­stand they (De­sal­cott) is run­ning a busi­ness...they are ow­ing T&TEC as well.”

In the re­port, it stat­ed that WASA pur­chas­es de­sali­nat­ed wa­ter through two wa­ter sale agree­ments that are “take-or-pay con­tracts” with sep­a­rate op­er­a­tors-De­sal­cott and Sev­en Seas Wa­ter Cor­po­ra­tion (SS­WC).

The agree­ments re­quire WASA to pay the op­er­a­tors in US dol­lars and in­volve a sys­tem of mea­sur­ing plant out­put by the op­er­a­tors and WASA which feeds in­to the in­voic­ing sys­tem.

WASA has agreed to pay De­sal­cott US$1/cm for an out­put lev­el of 40 mil­lion gal­lons of wa­ter dai­ly.

This trans­lates in­to an an­nu­al pay­ment of US$84 mil­lion (over TT$500 mil­lion) to De­sal­cott.

SS­WC’s 17-year con­tract with WASA ends on Au­gust 31, 2027.

They sup­ply WASA with 5.6 mil­lion gal­lons of wa­ter dai­ly and is paid US$16 mil­lion an­nu­al­ly.

Gov­ern­ment has been ex­pend­ing $2 bil­lion an­nu­al­ly to keep WASA afloat.

WASA pro­duces 243 mil­lion gal­lons of wa­ter a day.

The re­port stat­ed while the ini­tial in­ter­est of de­sali­nat­ed wa­ter pur­chas­es was to sup­ply the Point Lisas In­dus­tri­al Es­tate which gen­er­ates enough in­come at TT$12/m3 (wa­ter im­prove­ment rate) for full fi­nan­cial re­cov­ery, “the re­al­i­ty is that WASA has been ex­port­ing the ma­jor­i­ty of the de­sali­nat­ed wa­ter out­side of the in­dus­tri­al es­tate.”

In the case of Point Lisas where WASA is sig­nif­i­cant­ly in­debt­ed to De­sal­cott on­ly 30 per cent (12 mil­lion gal­lons dai­ly) of de­sali­nat­ed wa­ter pur­chas­es are con­sumed in the es­tate.

“This is a sig­nif­i­cant de­cline caused by the shut­down of sev­er­al ma­jor fa­cil­i­ties from 2014 to present, where WASA pre­vi­ous­ly sup­plied around 22 mil­lion gal­lons. Ef­fec­tive­ly the ma­jor­i­ty of ex­pen­sive de­sali­nat­ed wa­ter is di­rect­ed to do­mes­tic cus­tomers and WASA is un­able to re­cov­er this cost be­cause these cus­tomers do not pay based on vol­u­met­ric con­sump­tion but on a rate struc­ture that is premised on an out­dat­ed prop­er­ty val­ue sys­tem,” the re­port re­vealed.

The com­mit­tee not­ed the con­tract be­tween WASA and De­sal­cott “is more bur­den­some for the Gov­ern­ment than that of SS­WC be­cause of the high­er bill from high­er vol­ume pur­chased, the re­quire­ment for full pay­ment in US dol­lars and a long term arrange­ment.”

The re­port re­vealed that the com­mit­tee sought le­gal opin­ions from in­de­pen­dent coun­sel and WASA’s le­gal team on the op­tions avail­able to the Gov­ern­ment.

“Both have ad­vised that WASA can ex­tri­cate it­self from the con­trac­tu­al agree­ment with De­sal­cott by ex­er­cis­ing its right to pur­chase the fa­cil­i­ty.”

The pur­chase price would be in US dol­lars and equal to the net val­ue of the busi­ness at the time of ap­plic­a­ble no­tice to pur­chase as de­ter­mined by an in­de­pen­dent ap­prais­er, the re­port stat­ed.

The net val­ue of the busi­ness would in­clude:

1) The resid­ual val­ue which as at Sep­tem­ber 2020 and ap­plic­a­ble to the orig­i­nal op­er­a­tions of 24 mil­lion gal­lons dai­ly in pro­duc­tion achieved in 2004 is US$55 mil­lion.

2) Amounts due from De­sal­cott to its sup­pli­ers and con­trac­tors.

3) Eq­ui­ty in­ter­est in the fa­cil­i­ty pro­vid­ed that in no event shall the net val­ue of the busi­ness be less than an amount equal to the sum of the resid­ual val­ue at the time of the de­ter­mi­na­tion plus the cost of the ap­praisal and ex­pens­es re­lat­ed to the trans­fer of the fa­cil­i­ty.

“There are oth­er mat­ters for con­sid­er­a­tion in this process of ex­tri­ca­tion which in­cludes an ir­rev­o­ca­ble no­tice of pur­chase, se­lec­tion of the in­de­pen­dent ap­prais­er, time­frames for ap­praisal, pe­ri­od to pay, and test­ing and guar­an­tee­ing of fa­cil­i­ty re­li­a­bil­i­ty and per­for­mance.”

With Re­spect to SS­WC, there is no pro­vi­sion that gives WASA the right to pur­chase its sys­tem.

De­sal­cott re­sponds

Yes­ter­day, gen­er­al man­ag­er of De­sal­cott John Thomp­son told Guardian Me­dia he had no idea its com­pa­ny was men­tioned in the re­port.

“Ob­vi­ous­ly, you have giv­en me some de­tails that I was not aware of. I don’t have any com­ment to make at this point.”

Thomp­son said he would look at the re­port once it is laid in Par­lia­ment “and we will be hap­py to co­or­di­nate with WASA on a way for­ward.”

Un­der his regime, Pan­day said WASA signed the con­tract with De­sal­cott.

“What hap­pened was that WASA had com­plained that peo­ple are not get­ting wa­ter be­cause they had to send wa­ter to Point Lisas. We had to find a way to pro­vide wa­ter to Point Lisas so that WASA could pro­vide wa­ter to the peo­ple.”

He said WASA has spent over $20 bil­lion in the last decade while peo­ple con­tin­ue to suf­fer for wa­ter.

“If you com­pare the mon­ey they are spend­ing on De­sal­cott which pro­vides wa­ter in­ci­den­tal­ly with the mon­ey they spent on WASA which pro­vides no wa­ter I think they have an eco­nom­ic prob­lem. The point about it is, if WASA can pro­duce the wa­ter there is no need for De­sal­cott. While we are wait­ing for wa­ter I hope we do not die of thirst,” Pan­day said.