BiWater contract under review – $4M annual saving

The current government has announced that it expects to save $4 million annually when it completes a re-negotiation of the controversial contract that the former Virgin Islands Party administration signed with BiWater back in 2010.

A Memorandum of Understanding that sets the re-negotiation into motion has been signed, according to Minister of Communication and Works Mark Vanterpool.

But, the final agreement will not be signed until other negotiations are completed by Seven Seas Water BVI Limited, which recently became involved with the operation of BiWater BVI Limited.

Vanterpool explained: “A Memorandum of Understanding has been signed with Seven Seas Water BVI Limited (BiWater) and the Government of the Virgin Islands to review the BiWater contract, with a view to lowering the water rate charged under the Water Purchase Agreement. This is subject to agreement with the lender [to BiWater] – Barclays PLC and UK Export Finance (UK EF).”

“Expectations for a final agreement are imminent…. The only delay in the finalization of those agreements right now is for the lenders to BiWater which is Barclays PLC to along with UK EF… As soon as they have finalized their sign-off in the agreement that we are discussing, then we will be able to make an announcement. Hopefully that’s very imminent,” Vanterpool said.

Tough negotiations

The minister added that the negotiation regarding the new contract has been tough.

“It has not been an easy discussion and negotiation, but we obviously were not comfortable [with the current contract], and the parties on the other side was willing to negotiate with us… Obviously, negotiations have give and take, and I will explain that to you when we have finalized the agreement hopefully in the next couple of weeks,” the minister added during a ceremony where he today announced the signing of three other water purchasing agreements.

Breakdown of savings

Those three other agreements, the minister added, will result in the government saving some $2 million annually.

When the BiWater contract re-negotiations are complete, the government expects its overall savings to climb to approximately $6 million annually.

“Once this Memorandum Of Understanding is concluded and becomes a Supplemental Agreement, the government is expected to save approximately $4 million per annum. This will bring a total savings, through our negotiations on all Water Purchase Agreements, to approximately $6 million per annum.”

Over the years, Vanterpool, along with other members of the National Democratic Party government have lamented what they consider to the the negative implications of the original BiWater contract.

Vanterpool went as far as to describe it as an ‘albatross’ around the government’s neck, adding that the administration could end up having to pay some $100 million if it were to scrap the contract.

At the event held at the Premier’s Office today, Vanterpool acknowledged the challenges the government has been facing with the BiWater contract.

“Obviously the [BiWater/Seven Seas] contract is something that the Government of the Virgin Islands have been concerned about since we entered office in 2011. From that time until now we’ve been having various discussions with the principals of the agreement with an effort to try to reduce the cost of the water to the government,” he said.

“As you recall, we began by understanding that the [BiWater/Seven Seas] contract will be $12.70 per thousand gallons. As at January this year, the bill that I saw, we’ve been paying $21.68 per thousand gallons according to the agreement. That obviously was of great concern to us. So we have gotten an arrangement, and we are making agreements through negations with this group to try to reduce the cost of the water to the territory.”

Vanterpool continued: “Once we have come to the final agreement, I will have a similar press conference and explain all of the facets we have come through… It’s just a Memorandum Of Understanding right now, nothing binding on either side. But it shows that we have come to a point where we have agreed to do a number of things to try to reduce the price of water in the territory.”

Gov’t to save $2M annually from 3 water deals