Desalcott  not for sale

 

The Desalination Company of Trinidad and Tobago (Desalcott) is not for sale.

Nor will it consider an offer by the Government at this time.

The Point Lisas-based company has taken issue with statements made by Public Utilities Minister Marvin Gonzales that the Government would explore the option to purchase Desalcott as part of its attempt to prevent further “blackmail” and as a way of writing off its multi-million-dollar debt. He said the country was being held to ransom for water if the Government couldn’t meet its payments.

A company spokesperson told the Sunday Express that “Desalcott is not in the illegal business of blackmail or whitemail as alleged. As a private sector investment 20 years ago, we are in the business of supplying water to WASA and have always honoured our contractual obligations.”

Gonzales, the chair of a Cabinet sub-committee on WASA, will issue a ministerial statement and lay the committee’s report in Parliament on Friday.

He has said the initial 20-year contractual agreement between WASA and Desalcott was one of the worst decisions made under then-prime minister Basdeo Panday as the country assured that water produced by Desalcott would not have entered the domestic grid, but be used specifically for the Point Lisas Industrial Estate.

Today, 20 million gallons of water produced by Desalcott enters the domestic grid, Gonzales said in a newspaper report on Friday.

Desalcott is paid US$7 million every month for water.

But the company’s spokesperson said it has continued to provide water, in spite of not being paid for the last six months.

In September 2020, it supplied 40.01 million imperial gallons per day (migd); in October 2020 it supplied 39.29 migd; in November 2020, 30.53 migd (a shutdown of one week for maintenance was done that month); in December 2020, it supplied 37.76 migd; in January 2021, 38.68 migd; and in February 2021, it has supplied 36.85 migd.

“In spite of the tremendous amounts being owed to us, we have continued to honour our contractual obligations to WASA at a tremendous personal sacrifice and with the understanding by our local and foreign suppliers for non-payments,” the spokesperson said.

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

Gonzales said the contract was “unsustainable”.

The spokesperson said Desalcott’s bill is less than the US$7 million a month.

“We have chosen not to breach the legal and binding agreement with WASA by not revealing any information in the public domain. We have chosen to comment on this aspect of the ongoing issue in the public domain because our reputation and credibility has been insulted and attacked. We are well respected worldwide,” the spokesperson said.

“We employ 120 local people to manage and operate the Point Lisas desalination plant which supplies about 25 per cent of the country’s water. Water is an essential commodity and it sustains life. During this Covid-19 pandemic, water is an essential tool to prevent illness. Therefore, Desalcott has risen above the current negative issues in the public domain and has considered it a social and moral responsibility to ensure our fellow citizens and the companies in the energy sector in Point Lisas have a reliable supply of water. Nonetheless, we cannot continue indefinitely without being paid and would like to know when payment will be forthcoming,” the spokesperson said.

What the WASA report said 

According to the WASA report, WASA purchases desalinated water through two Water Sale Agreements that are take-or-pay contracts with Desalcott and Seven Seas Water Corporation.

In 2012, the contract was amended with an expiry date of December 31, 2036.

WASA’s annual bill to Desalcott is US$72 million, which is US$6 million a month.

The report said while the initial intent of desalinated water purchases was to supply the Point Lisas Industrial Estate, which generates enough income for full financial recovery, the reality is that WASA has been supplying the majority of the desalinated water to T&T’s water grid outside of the industrial estate.

It noted that in the case of Point Lisas, only 30 per cent of the desalinated water purchases are consumed on the estate, as a result of the shutdown of major plants on the estate.

“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 contract between WASA and Desalcott is more burdensome for the Government than that of Seven Seas because of the higher bill from higher volumes purchased, the requirement for full payment in US dollars and a longer-term arrangement,” the report said.

The report said the Sub-Committee sought legal opinions from independent counsel and WASA’s general counsel and corporate secretary on the Government’s options with regard to the contract.

“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 said.

The net value of the business

would include:

1) The residual value, 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, time-frames for appraisal, period to pay, and testing and guaranteeing of facility reliability and performance,” the report said.

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