The San Antonio Water System board on Wednesday unanimously approved a measure that lets Garney Construction, a Missouri-based construction firm, take over control and 80% equity of the Vista Ridge water pipeline project from financially-troubled Abengoa Vista Ridge, a subsidiary of Spanish energy giant Abengoa Sociedad Anónima that filed for bankruptcy in March.
There is some final paperwork that SAWS President and CEO Robert Puente has to finalize, but Garney will officially take over the project by June 10. Abengoa will reimburse SAWS for the extra hours and resources spent performing due diligence on the change of control and will have "absolutely no say" in the project from now on, Puente said. The company will remain a 20% silent equity partner.
Garney's contract with SAWS is essentially the "same deal" that the SAWS board and then City Council approved in 2014, said SAWS Vice President of Governmental Relations and Water Resources Donovan Burton.
"One thing that really sticks out to me is how much of everything is the same,” Burton said. Most importantly, it retains the same "risk profile," that is, if the project fails or if there is no water delivered to San Antonio from Burleson County through the pipeline, SAWS does not have to pay.
What has changed for the Vista Ridge project as a whole is the quality of work, Donovan said, lauding Garney's 30-years of experience working with SAWS and commitment to pay for more expensive materials and to streamline project details. For instance, Abengoa's contract with BlueWater included 3,400 groundwater leases along the 142-mile pipeline, but Garney found that only 1,300 leases were necessary.
"Only the leases that actually relate to this acreage are part of this contract now," Puente said.
Garney, already the construction partner for the project and now in charge of operations, maintenance, and financing, will also be paying contractors that have been unpaid by Abengoa on preliminary work done.
"Despite these added costs, they can make it work," Donovan said.
Abengoa had spent roughly $16 million on the project so far, a number that was previously reported by Abengoa at $20 million. That $4 million difference, Puente said, was spent on "a lot of travel, a lot of excess salaries," and other things unrelated to Vista Ridge.
Design, construction, and financing of the project is expected to cost $844 million, according to a news release from Garney. But numbers provided by SAWS indicate it could cost up to $911 million. The pipeline is supposed to deliver 50,000 acre-feet of water for 30 years to San Antonio starting in 2020.
Because the contract allowed SAWS to lock in interest rates on water from the project at 3.92%, the estimated $3.4 billion project will now cost $529 million less, more than half a billion less. For 30 years, SAWS and its ratepayers will pay $1,606 per acre foot as opposed to $1,959 per acre foot if the maximum interest rate allowed in the contract, 6.04%, was used.
The now $2.870 billion water supply project will produce some of the most expensive water in the state, but to have a set rate for 30 years most enviable, SAWS board Chair Heriberto “Berto” Guerra said.
While the Abengoa chapter of the project comes to all but a close on Wednesday, it might not be the last time a change in contract comes before the SAWS board.
Garney has the option of transferring away operation of the pipeline to another company either before or after construction is complete, Puente said.
"They're a construction company, they're not an operating company and so it might not be in their expertise to do," Puente said. "(Garney is) in constant communication with operating companies."
City Council would be advised on that process, but ultimately such a transfer would only have to be approved by the SAWS board.
Representatives from Garney Construction declined to speak with reporters after the meeting, but released a statement after the vote.
"Garney looks forward to completing this critical project for San Antonio's water future and continuing its longstanding relationship with SAWS," stated Garney President and CEO Mike Heitmann.
The three citizens signed up to speak during the meeting, members of the Alamo Sierra Club, called for SAWS to call off the entire project and to instead focus on conservation and city planning strategies rather than pipe water from afar.
"The perception of abundant water is a danger to San Antonio," said Alan Montemayor, because it will encourage growth beyond sustainable levels.
Mayor Ivy Taylor and Guerra thanked the citizens for their input, but reiterated that conservation and desalination efforts will likely not be enough to accommodate the growth coming to San Antonio.
"(Thank you) for challenging us and asking questions becuase that's part of the process," Taylor said. "The biggest risk for us is in not securing our water future."
Top image: Garney Construction COO Scott Parrish (right) observes the board meeting with a colleague. Photo by Scott Ball.