Board approves refinancing loan, bonds at lower interest rate
Published: January 5, 2012
Font size: [A] [A] [A]
ST. THOMAS - The V.I. Water and Power Authority board Wednesday approved refinancing an electric system loan and all of WAPA's outstanding revenue refunding bonds at a lower interest rate over a longer time period to reduce the utility's indebtedness.
The recommendation, which the six attending board members approved, would take advantage of low interest rates that would help WAPA manage its cash flow, said WAPA Executive Director Hugo Hodge Jr.
The decision to refinance would cut interest rates but extend payments. It also would improve electric system liquidity and remove the refinancing market risk on the balloon payment of the $40 million term loan with FirstBank that the utility originally executed in 2008 and refinanced 2010, according to a WAPA press release.
The new loan expires in 5.8 years instead of the three years set forth in the original agreement.
WAPA would save $1.3 million in interest, Hodge said.
The board also approved refinancing two $10 million working capital lines of credit with FirstBank and Banco Popular de Puerto Rico.
The utility uses lines of credit to bridge the gap between paying vendors today and collecting bills owed from months' past, said WAPA Chief Financial Officer Joseph Boschulte.
HOVENSA payments are one such expenditure.
"The working lines of credit allows for more liquidity and are considered a financial tool to manage cash flow," Boschulte said.
WAPA's latest estimates of how much the utility owes HOVENSA exceed $30 million, which is about the amount the V.I. government owes in power and water bills to the utility.
The lines of credit will be used in part to pay down debts to HOVENSA.
The board also approved a fourth supplemental bond resolution to the outstanding existing electric system revenue refunding bonds series 1998 to avoid owing a final payment of $17 million at the end of the loan term.
Attending the emergency meeting by video and teleconferencing were board chairwoman Juanita Young, vice chairman Gerald Groner and board members Noel Loftus, V.I. Licensing and Consumer Affairs Commissioner Wayne Biggs, Cheryl Boynes-Jackson and Brenda Benjamin.
V.I. Department of Planning and Natural Resources Commissioner Alicia Barnes, Energy Office Director Karl Knight and Donald Francois were excused.
- Contact reporter Michael Todd at 714-9104 or email mtodd@dailynews.vi.
To comment you must first create a profile and sign-in with a verified DISQUS account or social network ID. Sign up here.
Comments in violation of the rules will be denied, and repeat violators will be banned. Please help police the community by flagging offensive comments for our moderators to review. By posting a comment, you agree to our full terms and conditions. Click here to read terms and conditions.
