SAWS pipeline builder struggling to pay the bills - San Antonio Express-News
Beset by financial difficulties, the company preparing to build a
water pipeline from Burleson County to San Antonio is trying to sell 80
percent of its share of the project to a new, as-yet-unknown investor.
Abengoa Vista Ridge director Pedro Almagro told the San Antonio Water
System’s board of trustees Tuesday that his company is behind on
payments to some vendors and is soliciting proposals from potential
financial backers.
Under a
fall 2014 deal with SAWS,
Abengoa Vista Ridge was to pay for design, engineering and construction
of the a 142-mile pipeline that would draw up to 16.3 billion gallons a
year from
18 wells in Burleson County. It would begin delivering water in 2020.
The arrangement between SAWS and Abengoa Vista Ridge is complex. The
whole project is expected to cost $844 million. Abengoa Vista Ridge was
supposed to put in $82 million but is seeking an equity partner to pay
for 80 percent, Almagro said, which works out to $65.6 million.
Abengoa Vista Ridge would arrange for $762 million in tax-free
bonds to be issued through the Mission Economic Development Corp. to
finance the rest. SAWS has signed a contract to buy the water.
Including financing costs, San Antonio ratepayers would indirectly
pay back the bondholders, Abengoa Vista Ridge and its partner a total of
$3.4 billion over 30 years. SAWS will own the pipeline by 2050.
Abengoa’s decision to seek a new investor won’t affect SAWS ratepayers’ bills.
In late November, deeply indebted Spanish parent company
Abengoa S.A. filed for creditor protection
in Spain in the hopes of avoiding full-on bankruptcy. Negotiations
between the company and its creditors must be complete by March 28,
Almagro said.
Abengoa’s stock price has plunged since summer 2014 from a five-year high of $20.27 a share to 87 cents Tuesday.
San
Antonio Water System President/CEO Robert R. Puente signs a 54-inch
diameter pipe Dec. 3, 2014, at an event held at announcing the launch of
the new Vista Ridge water project. The pipe represents the width
... more
Beset by financial difficulties, the company preparing to build
a water pipeline from Burleson County to San Antonio is trying to sell
80 percent of its share of the project to a new, as-yet-unknown
investor.
Abengoa Vista Ridge director Pedro Almagro told the San Antonio Water
System’s board of trustees Tuesday that his company is behind on
payments to some vendors and is soliciting proposals from potential
financial backers.
Under a
fall 2014 deal with SAWS,
Abengoa Vista Ridge was to pay for design, engineering and construction
of the a 142-mile pipeline that would draw up to 16.3 billion gallons a
year from
18 wells in Burleson County. It would begin delivering water in 2020.
The arrangement between SAWS and Abengoa Vista Ridge is complex. The
whole project is expected to cost $844 million. Abengoa Vista Ridge was
supposed to put in $82 million but is seeking an equity partner to pay
for 80 percent, Almagro said, which works out to $65.6 million.
Abengoa Vista Ridge would arrange for $762 million in tax-free
bonds to be issued through the Mission Economic Development Corp. to
finance the rest. SAWS has signed a contract to buy the water.
Including financing costs, San Antonio ratepayers would indirectly
pay back the bondholders, Abengoa Vista Ridge and its partner a total of
$3.4 billion over 30 years. SAWS will own the pipeline by 2050.
Abengoa’s decision to seek a new investor won’t affect SAWS ratepayers’ bills.
In late November, deeply indebted Spanish parent company
Abengoa S.A. filed for creditor protection
in Spain in the hopes of avoiding full-on bankruptcy. Negotiations
between the company and its creditors must be complete by March 28,
Almagro said.
Abengoa’s stock price has plunged since summer 2014 from a five-year high of $20.27 a share to 87 cents Tuesday.
Your browser does not support the <code>iframe</code> HTML tag.
Try viewing this in a modern browser like Chrome, Safari, Firefox or Internet Explorer 9 or later.
The current contract with SAWS allows Abengoa Vista Ridge to
seek an outside investor for up to 49 percent of its share, meaning
Abengoa Vista Ridge would keep a controlling interest in the project.
Lowering its share to 20 percent will require a revision, SAWS President
and CEO Robert Puente said.
The revision must be approved by the SAWS board, but not the City Council, he said.
In a
Jan. 13 letter hand-delivered
to Abengoa’s San Antonio office, Puente wrote that Abengoa Water
chairman and CEO Carlos Cosin told SAWS his company would need another
month or two to reach financial close, a key milestone that was expected
to come in May.
Puente asked Almagro for information about other companies that might
get involved in Vista Ridge, a “comprehensive and realistic timeline”
to financial close and quarterly financial statements from Abengoa Vista
Ridge.
At Tuesday’s board meeting, SAWS Chairman Heriberto “Berto” Guerra
Jr. publicly reminded Almagro that the contract allows SAWS to take over
the project.
“We would prefer you do it,” Guerra said. “But, guess what, SAWS has
built 50-plus-mile pipelines before, and we’re very, very good at it.”
SAWS officials previously have explained why they wanted a private company to build the pipeline instead of going it alone.
The utility’s most recent pipeline project now delivering groundwater
pumped from the Carrizo-Wilcox Aquifer below Gonzales County via the
Schertz-Seguin pipeline, gave the utility plenty of headaches — from
shifting regulations in the Gonzales County Underground Water
Conservation District to the expense of outreach to the people of the
rural county.
At one point, SAWS had spent upwards of $30 million over 10 years
before it had even obtained water permits from the district, Puente said
in a November interview.
“We didn’t want to have to go through that again,” Puente said then.
“So when we negotiated this contract, we told the respondents that all
those kinds of risks, we wanted them to take.”
Asked Tuesday whether SAWS taking over the Vista Ridge looks more
attractive in light of Abengoa’s difficulties, Puente said it does.
“As it progresses, yes, but we’re not there yet,” he said. “There’s still a whole lot to do before we get to that point.”
Six companies are in the process of submitting proposals to Abengoa
Vista Ridge, company public relations manager Sapna Mulki said. She
would not disclose them but described them as “developers” and “pure
equity investors.”
“The project remains feasible and very interesting for many people,” Almagro told the SAWS board.
Guerra told Almagro that SAWS needs access to any proposals Abengoa Vista Ridge receives as soon as possible.
“Any company or group that would become an equity partner would have
to agree with all the things we outlined to Abengoa Vista Ridge on that
project,” Guerra said. “As long as they agree to everything that’s on
there, then we, since we’re the customer, we would be more than happy to
look at that particular company to see if they’re acceptable to us.”
Vista Ridge is a “critical” project for Abengoa, Almagro told the
board — the kind of project that will move the company forward as it
sells other assets all over the world. The company is selling its U.S.
ethanol operation and solar projects in the Middle East, among others.
“The future is much more focused on engineering and construction,” Almagro said.
Asked by SAWS Trustee David McGee whether Abengoa Vista Ridge has
paid all of its design, engineering and construction vendors on time,
Almagro said: “There are some vendors that are not up to date.”
Almagro did not identify which vendors were not being paid, though he
said San Antonio-based Pape-Dawson Engineers, the lead engineering
consultant on the project, had voluntarily agreed to move to the back of
the line.
“It has not been easy to get all the funds we need,” Almagro said.
Puente said he did not know specifically which vendors are not being paid.
“I know there are water well drillers that are complaining a lot,” he said.
Guerra also expressed concern about the idea of using fiberglass to
build the 54-inch-diameter pipeline that SAWS is set to take over in
2050.
“At the end of 30 years … we take over the project for the next 30
years, and we want the quality of pipe we’re comfortable with,” he said.
“The use of fiberglass pipe material is not acceptable to us.”
Almagro said his company understands and is discussing this with potential investors.
In November, the City Council voted for a water rate increase that
would in part pay for the pipeline. The new rates raised the average
residential bill from $51.75 to $55.65 and took effect Jan. 1. SAWS
expects bills will rise to an average of $81.73 in 2020.
The rate increases will also pay for sewer upgrades required by the
U.S. Environmental Protection agency and a plant to treat salty
groundwater below South Bexar County.
bgibbons@express-news.net
