SAWS: Vista Ridge is Not a Done Deal

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Concerned community members ask SAWS staff questions about the Vista Ridge water pipeline project at SAWS headquarters. Photo by Iris Dimmick.a

Concerned community members ask SAWS staff questions about the Vista Ridge water pipeline project at SAWS headquarters. Photo by Iris Dimmick.

There are several hoops Garney Construction will have to jump through before San Antonio Water System‘s executive team would consider recommending that its board approves of the Missouri-based construction firm taking over the Vista Ridge water pipeline, officials said during a public meeting about the water pipeline project Tuesday night.

“It’s not a done deal yet,” SAWS President and CEO Robert Puente told attendees.

Garney is still working with Abengoa Vista Ridge and lenders on a financial model, finance agreements, resolving lawsuits, and payments to banks and contractors. SAWS is still doing its own due diligence to see if Garney’s proposal to take over 80% of the Vista Ridge project is sound. The SAWS board will vote on the deal in late April or early May.

The Vista Ridge project won approval from City Council in October 2014, but Abengoa filed for protection against its creditors in November 2015. Garney has already been contracted as the construction firm to work on the project, which is seen as an advantage by SAWS leadership.

“We did the same due diligence with Abengoa,” Puente said after the meeting. “Now if anyone can predict that an international corporation is going to go bankrupt or file insolvency – (that person is) going to make millions of dollars.”

SAWS President and CEO Robert Puente answers questions during a public meeting regarding Vista Ridge. Photo by Iris Dimmick.

SAWS President and CEO Robert Puente answers questions during a public meeting regarding Vista Ridge. Photo by Iris Dimmick.

Much of the conversation at the meeting, which drew little more than 30 people and was live-streamed online, centered around the logistics of constructing the project that would bring up to 16.3 billion gallons of water a year to San Antonio from Burleson County and what options the current contract allows for.

Those options include SAWS staying with Abengoa Vista Ridge and wait for it to likely fail; it could allow Garney to take over; it could pull out of the current contract and re-issue a new one; it could take over the project itself – an unpopular option with many; or it could drop the water supply project all together and focus on others.

“The biggest risk is not doing the project,” Puente said. “We’re addressing that big risk by the current construction of our desalination plant.”

The first phase of SAWS’ brackish water desalination plant, set to start full production this year, will generate about 12 million gallons of water per day from the Wilcox Aquifer. Subsequent phases are scheduled to come online in 2021 and 2026 and will bring 30 million gallons more.

“I wouldn’t even call (desalination) ‘Plan B’ I would call it ‘Plan A-1’ because this (Vista Ridge) deal is not done yet,” Puente said. Garney and its consortium of banks considering backing the project, “they still have to reach an agreement with Abengoa.”

Notably absent on Tuesday were representatives of the local Sierra Club chapter who regularly attend public meetings and SAWS board meetings. Trinity University professor and co-chair of the Alamo Sierra Club Conservation Committee Meredith McGuire sent out an email Tuesday morning calling for conservation and environmental advocates to boycott the meeting, which she called a “sham.”

“We reject SAWS’ so-called ‘community meetings’ about the Vista Ridge project and refuse to cooperate with the pretense that they have anything to do with civic engagement,” McGuire stated. “It is clear that SAWS (including its Board) is complicit in promoting the deeply-flawed Vista Ridge scheme, enriching a number of highly profitable corporations, while forcing residential rate-payers to foot most of the bill.”

The average customer’s monthly bill went up $6.85 to $58.60 this year. By 2020, the average bill will climb to $81.73 – the same year water from Vista Ridge is expected to start. A majority of the recent increase was to pay for sewer infrastructure required by the federal government.

“Those critics will criticize anything this project is about,” Puente said. “A lot of the questions (tonight) were much more about financial questions, operational questions – not just ‘I oppose the project.'”

Puente said he and his staff would be willing to go to the Sierra Club, if asked, for a presentation. At time of publication, nothing has been scheduled.

“The contract is a result of the due diligence. Anything adverse that’s happening now is addressed in that water transmission and purchase agreement,” Puente said. The terms of the contract allow SAWS to approve or deny major changes like the 80% equity transfer. “We have the ultimate hammer, and believe me, we have it cocked and they see it cocked.”

St. Mary’s University law professor Amy Hardberger, a geoscientist that has been closely following the Vista Ridge project, left the meeting with mixed reactions.

“Information is always good, but sometimes when it’s more of a presentation style it’s hard to get into the nuts and bolts of it and really have an in-depth discussion,” Hardberger said. Her questions were answered, but there were still some lingering doubts about the future of the project and the basic need for the project.

Donovan Burton, SAWS vice president of Governmental Relations and Water Resources (left), and SAWS President and CEO Robert Puente listen to a question posed by Amay Hardberger, whose image is projected on the screen behind them. Photo by Iris Dimmick.

Donovan Burton, SAWS vice president of Governmental Relations and Water Resources (center), and SAWS President and CEO Robert Puente listen to a question posed by Amy Hardberger, whose image is projected on the screen behind them. Photo by Iris Dimmick.

“This whole project, the reason why it was considered a good project was on two main factors,” she said. “One was that Abengoa was a great partner – they’ve done these types of projects before – and there’s no risk involved.”

Now that Abengoa is pretty much out of the picture and Garney is a construction firm, “you really do have to wonder if that risk profile is as guaranteed as it was in the beginning,” Hardberger said, adding that she would be very concerned if SAWS decided to take over the project.

Another key part of the project, as it was presented to City Council, is that ratepayers will only pay for water that reaches San Antonio – all the risks would be on Abengoa or Garney if it takes over the contract as-is. That’s why the water would come at a premium price.

If SAWS took over the project, Puente said, the project and the water would be cheaper, but San Antonio ratepayers would be stuck with the bills whether the pipeline is completed or whether water actually reaches their faucets.

Some members of City Council have signaled that they would be extremely critical of assuming that risk. SAWS Chief Financial Officer Doug Evanson said taking over the project would be a nightmare in terms of finding the capital.

“That is something that I am not at all interested in doing,” Evanson said.

 

https://rivardreport.wildapricot.org

 

Top image: Concerned community members ask SAWS staff questions about the Vista Ridge water pipeline project at SAWS headquarters. Photo by Iris Dimmick.

Related Stories:

Mayor Hopes to Dispel ‘Misinformation’ About Vista Ridge

Garney Construction Taking Over Vista Ridge Water Pipeline

Troubled Abengoa Files for Protection from Creditors

Council Approves New Water Rates, Structure

Commentary: Is the Vista Ridge Groundwater Reliable?

5 thoughts on “SAWS: Vista Ridge is Not a Done Deal

  1. What a peculiar comment you quote Mr. Puente making “Now if anyone can predict that an international corporation is going to go bankrupt or file insolvency – (that person is) going to make millions of dollars.”

    Well, yes, that’s right. You can make lots of money investing in high yield (aka junk) corporate bonds, or betting against the conventional market wisdom. But Mr. Puente’s answer, as SAWS CEO, is so off target to the Rivard report reporter’s reasonable concern, because we are investing public dollars. His reply implies that is a complete impossibility to evaluate the risks of investing in a company as large as Abengoa. If debt is involved, surely somebody is issuing and rating that debt. SAWS and Mr. Puente need to conduct this next due diligence without being charmed by the allure of the “big project”. Meanwhile, let’s fix the sewers, please.

  2. Lissa is correct; though I would characterize Mr. Puente’s statement more as revisionist history. At the time that SAWS Board was approving Vista Ridge and SAWS was requesting City Council’s approval of the project, Abengoa’s most recent report to the US Securities and Exchange Commission stated that for the prior 3 years its liabilities had exceeded its assets. That is the definition of “insolvency”. Recognizing this, the financial markets had awarded junk status to Abengoa debt. Further, its share price was on the way down, dropping over 25% between June 2014 and the time Council approved the project at the end of October of 2014. These facts were pointed out to SAWS and Council and the suggestion was made that further due diligence should be done on the financial stability/viability of Abengoa as a partner. The response by Mr. Puente at that time was to assure City Council that SAWS had done its homework on this and they were fully convinced that Abengoa was financially solid and would be around throughout the 30 year period of the contract. How these conclusions were reached is unknown as open records requests at the time were denied thru appeal to the Texas AG’s Office for access to the due diligence carried out by SAWS on Abengoa and of the City Manager’s office on Vista Ridge (in order to justify the City CFO having informed Council that “in his professional opinion” the deal should be approved). Having spoken with several different investment bankers at that time about Abengoa’s risk profile and the magnitude of the deal, I asked them what their bank’s responses would be if Abengoa approached them for financing. All essentially said the same thing: “run away”.

  3. Didn’t the Vista Ridge report SAWS tried to bury SPECIFICALLY state that the lack of financial stability of Abengoa was a serious concern and that the project should be reevaluated because of that (and a number of other reasons)? The guy who prepped that report and then was essentially forced to resign has to be feeling pretty vindicated. It took a lot of courage for him to take a stand against this project, and, as it continues to unravel, we owe him a big thank you for knocking down the first domino. This project is an absolute disaster. The last-minute scrambling to replace Abengoa with some other group is incredibly concerning. We need to be thoughtful about any decision we make that has such pronounced implications on our citizens, and the fact that they are still trying desperately to shove this down our throats is quite fishy to me…

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