After recently handing over the Baugher’s Bay Desalination Plant to the management of private entity Sage Utilities Holdings Limited, it came as a surprise in the House of Assembly today February 12, 2013 that the Ministry of Communications and Works is not aware of the market value of the plant nor its revenue earning potential. These were among two questions put forward by the Representative for the Third District, Hon. Julian Fraser RA to Minister for Communications and Works Hon. Mark H. Vanterpool (left) at the Sixth Sitting of the Second House of Assembly. Photo: GIS/File

These were among two questions put forward by the Representative for the Third District, Hon. Julian Fraser RA to Minister for Communications and Works Hon. Mark H. Vanterpool at the Sixth Sitting of the Second House of Assembly.

The Minister had said that his Ministry did not have the answer to the two questions but was able to say what were the quantity of water supplied and the cost per 1000 imperial gallons supplied to Government by the Bar Bay Plant, Sea Cows Bay Plant and the Baugher’s Bay Plant.

He said the quantity of water supplied and cost per 1000 imperial gals supplied to Government Bar Bay Plant for the period of January to December 2012 is 190, 541, 000gls at a cost of $19.55c per 1000gls. The Sea Cows Bay Plant some 119,337, 573gls at a cost of $19.62c from January to May 2012 and $19.92c from June to December 2012. The Baugher’s Bay plant supplied some 228, 531,000gls at a cost of approximately $8.65c per 1000gls.

Minister Vanterpool then explained that while the cost of water per 1000 Imperial gallons of water at the Baugher’s Bay Water Plant appears significantly lower than the contractual arrangements currently exercised by Government, it was necessary to understand that there were some tangible and intangible costs at the Baugher’s Bay Plant not reflected. 

He continued that Government does not have desalination water plant management expertise, therefore significant risk of downtime and operational failure persisted at the plant; that the cost of oversight by the management of the Water and Sewerage Department and the Ministry including the Minister was not reflected in the above cost; the cost of depreciation, major repairs and maintenance, cost of  stock piling costly spare inventories, investment risk and profit incentives were also not reflected in the operation costs of the Baugher’s Bay Water Plant.

Minister Vanterpool also said that the water rationing throughout the Territory for the

past 2 years is largely due to the significantly lower production of water from the Baugher’s Bay Plant, along with the delay of production by Biwater, as a result of its miscalculation of the availability of water in the water wells at Paraquita Bay.

“Madam Speaker, a comprehensive review of the unsatisfactory water supply situation in the territory is being undertaken. I will advise the public within the next two weeks of our plans for the short term, medium term, and long term solutions to our water issues in the Territory.”

Hon. Fraser was dissatisfied that Minister Vanterpool could have gone into details about the quantity of water produced by the water plants and their operational costs, along with other details, but could not say what was the market value of the Baugher’s Bay Plant and its revenue earning capability.

“It would have been part of the process of getting the other details for the answers given in Part E [of question]. He explained that the Minister was able to give in detail the reason for the cost of water being so low for the Baugher’s Bay Plant but found it surprising that he could not answer the first two questions about the market value of the plant and the revenue earning potential. “How did he get through that analysis in question E without coming first to the answer of the market value of the plant and the revenue earning potential of the plant?”

Hon. Vanterpool at first said he was confused about the question and then said that he appreciated the Hon. Member’s questioning but his answer was simple and that was that he did not know the cost of the plant and if he did he would have been happy to share it with the Honourable Member. He explained that the revenue earning potential of the plant was not something he has paid attention to since he was Minister and that there are a lot of implications involved in revenue earning possibilities, including gross revenue, net revenue, expenses, “all these things are not things I have undertaken as a study at the Baugher’s Bay plant...”

Hon. Fraser then wanted to know if the information may not have been available somewhere since it had to be used for the most recent negotiations that took place to outsource the plant.

Hon. Vanterpool then said he could not understand that the Hon. Member of the Opposition was not trusting of his answer and that if he had the answer he would have shared it and would be most willing to share it during the course of the debate. To this, Hon. Fraser said he would never be distrustful of the Minister as he would expect the Minister to only speak the truth.

Background to Baugher’s Bay Plant being outsourced

On November 29, 2012, Sage Utilities Holdings Limited signed a contract with the National Democratic Party (NDP) Government for the management and operation of the Baugher’s Bay Plant over the next six months effective December 1, 2012. The plant remains the property of the VI Government.

The signing of the contract was expected to ensure the production of hopefully 950, 000 imperial gallons of water per day and is expected to clear up some of the issues of water shortage that the Territory is now facing, hopefully within the next few months, it was said at the contract signing.

Hon. Vanterpool had said then that since March 2010 Government has had the full responsibility of the operation of the Baugher’s Bay Desalination Plant and that from then to now a great deal of money had been expended to refurbish, manage, maintain and operate the plant.

As a result of the challenges to management, Hon. Vanterpool said, the plant’s expenditure increased while production decreased. “At best production levels have been inconsistent. At its full capacity, the Baugher’s Bay Plant should produce approximately 1 million imperial gallons of water per day. On average it is currently producing 650, 000 imperial gallons per day and over the last seven months capacity has dropped sometimes to as low as 350, 000 imperial gallons per day.”

It was announced that there would be a fixed operation cost of $50, 000 monthly to operate the plant and in addition Government would be paying Sage Utilities Holdings Limited an added incentive of $2.50c per 1000 imperial gallons, which, according to Hon. Vanterpool, represented the lowest costs to Government for the purchase of water throughout the Territory in terms of managing the plant.

“This contract signifies a move in a positive direction to ensure that we can provide a clean and reliable source of municipal water for residents and visitors of the Territory....This is an interim measure until Biwater, who is contracted to produce water, is in a position to begin their production at their Paraquita Bay plant,” Hon. Vanterpool had stated at the contract signing in November.