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WAPA Announces Agreement to Switch to Propane for Electricity Generation

(Thursday, July 25, 2013)

WAPA announces agreement to switch to propane for electricity generation
Propane will reduce fuel costs by 30%, lead to significant savings for customers

The Virgin Islands Water and Power Authority on Thursday announced that it has signed an agreement with leading global energy supplier, the Vitol Group to use propane as the primary fuel for power generation in the U.S. Virgin Islands. The signing came after WAPA’s governing board voted unanimously to proceed with the agreement.

The use of propane as WAPA’s primary fuel will reduce WAPA’s fuel costs by approximately 30 percent and result in significant savings for all WAPA customers. Using propane will also decrease greenhouse gas emissions by about 20 percent.

Switching from fuel oil to propane will save approximately $90 million in annual fuel costs at recent prices, reversing the dramatic price increases that WAPA has been experiencing in its fuel purchases. By saving approximately 30 percent in fuel costs, WAPA will be able to significantly reduce the electricity rates for all of its customers beginning fall of 2014, with further reductions anticipated after five years..

“This is tremendous news for the U.S. Virgin Islands,” said WAPA Executive Director Hugo V. Hodge, Jr. “These fuel cost savings will translate into significant reductions in monthly bills for customers. As a result of this project, households, hospitals, schools, businesses and the Virgin Islands government will all significantly save on the cost of their monthly power bills. This reduction in the cost of electricity will provide families more money to spend on other essentials, allow businesses to make investments or hire more workers, and create job opportunities and increase tax revenues for the territory.”

WAPA is partnering with a leading global energy supplier, Vitol, to supply the new fuel and to develop the new facilities with the best-available technology in the world. The project includes the construction of the infrastructure necessary to deliver, receive, and store propane, and the conversion of WAPA’s turbines by General Electric at the St. Thomas and St. Croix plants to burn both propane and diesel fuel, if necessary.

Vitol is financing all capital costs associated with project construction, meaning WAPA will pay no upfront costs for the project, and will only begin to pay for the new facilities when propane begins to be used in 2014. Construction is set to begin by the end of 2013 or early 2014, and WAPA is anticipating being able to use propane as its primary fuel source by the fall of 2014.

The agreement, the result of a competitive bidding process, entails a minimum 5-year propane supply contract to meet WAPA’s fuel needs. The approximate 30-percent fuel cost reduction factors in all costs associated with construction, operation, maintenance and propane supply for the project. The capital costs of the new facilities and the conversion of the turbines to burn propane will be amortized over 5 or 7 years, with an option for complete repayment after five years. Afterwards, WAPA will fully own all of the new infrastructure and facilities.

“This is a phenomenal deal for the Virgin Islands,” said Governor de Jongh. “The increasing price of fuel oil has been the main driver of utility rate increases for more than a decade, and propane is the best near-term option to significantly reduce the cost of fuel for power generation in the territory. This project will finally free electricity and water customers from the burden of having to pay higher utility bills every time the market price of oil increases. And over the long term, this project will ensure that WAPA will be able to generate electricity from a variety of sources, so the Virgin Islands is no longer tied to just one fuel.”

In addition to being significantly cheaper than oil, propane is one of the cleanest-burning of all fossil fuels. Carbon dioxide (CO2) emissions of propane are 20 percent lower than that of fuel oil and 50 percent lower than coal. Propane is also nontoxic, so it does not pose any risk to soil or water. Plus, propane helps improve the quality of indoor and outdoor air as it produces substantially less particulate matter (soot) and NOX than diesel, oil, or coal.

This project will also allow WAPA to advance a number of initiatives to modernize existing facilities, increase its use of efficient technologies, and make continued investments in the use of renewable energy sources – including projects to bring 18 MW of solar power to St. Thomas and St. Croix by early 2014, as well as create 7MW of renewable electricity utilizing a St. Croix-grown feedstock called “giant king grass.”

WAPA plans to meet with communities and stakeholders across the Virgin Islands in the coming weeks and months. The meetings will inform residents about the project and be an opportunity to receive feedback, take questions and interact with customers. Be sure to follow PoweringVI on Facebook and check the project website about upcoming stakeholder meetings.

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About Vitol

Vitol is one of the world’s largest physical energy traders, moving energy from where it is produced to where it is needed. Vitol trades more than 5 million barrels of crude oil and oil products a day, and has 200 ships at sea at any one time transporting these resources. Around the world Vitol’s clients include; oil producers, refiners, utility companies, transport companies, shipping fleets and airlines. The range of products Vitol distributes and trades includes: crude oil, coal, gasoline, diesel, heating oil, fuel oil, jet fuel, naphtha, propane, natural gas and power.

Vitol is a truly global company, with a major presence in Houston, Geneva, London and Singapore, and more than 30 offices worldwide. Vitol’s business is built on long-term relationships with the clients it serves on all five continents. Vitol’s flexible and client oriented approach means it can be innovative and tailor its offering to best suit a client’s needs. Vitol is a partnership and is owned by about a third of its 1,000 plus employees. This enables Vitol to focus on the long-term, rather than the short-term.

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