WAPA Sued For $24.6 Million By Former Oil Supplier

ST. CROIX — The Virgin Islands Water and Power Authority is being sued by its former oil supplier Trafigura Trading, LLC, the firm that supplied W.A.P.A. with No. 2 based oil since winning a bid in 2012, and up until the semiautonomous entity signed a contract with oil supplier Glencore, PLC in 2015. But W.A.P.A. signed the contract with its new partner without paying some $24.6 million that it owes Trafigura, and the crude oil firm took its case to the territory’s District Court on Tuesday, hoping for a resolution.

Asked about the case, Jean P. Greaux, Jr., W.A.P.A.’s communications director said W.A.P.A. leadership became acquainted with the lawsuit through informal channels, and expects to resolve the matter in a non-confrontational manner.

“The authority is very much aware of its outstanding obligation to Trafigura for past shipments of oil products to the territory’s power plant. While the authority has not been served with the contract lawsuit, we have been made aware informally of Trafigura’s filing with the court and look to the day when this matter can be resolved in an amicable manner,” Mr. Greaux said.

Trafigura had decided not to continue doing business with W.A.P.A. until the power and water company could pay its outstanding balance. However, instead of paying Trafigura, W.A.P.A. entered into a contract with Glencore, Ltd. and renewed the contract through 2017, as made known by Julio Rhymer, the company’s interim director, during a February special board meeting.

Mr. Rhymer explained to board members that W.A.P.A.’s then-current contract with Glencore for No. 2 fuel oil was set to expire at the end of March, and an uninterrupted supply of this fuel type was needed until the authority switches to liquid propane gas (L.P.G.) as the primary source of fuel for the generation of electricity.

Mr. Rhymer told The Consortium that the territory would switch from fuel oil to propane by the end of July. But the contract, the sum of which was not revealed, extended Glencore’s supply of fuel to W.A.P.A. from April 1, 2016 through June 30, 2017 — ten months after W.A.P.A.’s stated conversion from fuel oil to propane.

“We have negotiated with Glencore, Ltd. and the company has proposed an agreement which does not require a minimum purchase obligation if the supply contract is extended to the end of June 2017,” Mr. Rhymer said. 

According to court documents, the $24.6 million that W.A.P.A. owes Trafigura dates back to June, 2015, when the contract between the companies expired. The authority’s then-CEO Hugo Hodge, who was abruptly ousted late January, wrote Trafigura a letter stating that W.A.P.A. had “regrettably encountered financial challenges beyond its control.”

Trafigura had been threatening to file suit since October, however the action was only recently taken in part because Trafigura contends that the Government of the Virgin Islands should have used some of the $220 million that it received from ArcLight Capital Partners, LLC, to pay at least part of the $42 million that it owes the authority, so W.A.P.A. could in turn meet its debt obligations.

In his letter to Trafigura, Mr. Hodge had promised to propose a payment plan that would “eradicate the outstanding balance in its entirety and fully settle this matter.” But the matter, months after Mr. Hodge’s ousting, still remains.