WASA will get steal of a deal

Desalcott General Manager John Thompson is not too concerned over the fact that the multi-million dollar company won’t see a profit on its books until 2012, ten years from now. In the oil and gas energy sector, a profit in ten years would be unacceptable, because these companies are looking for results in two-three years. “For a utility company, the return is on a longer time scale,” he said, noting that this is acceptable because the risks are not as great. Desalcott, he said, is not subject to highly fluctuating market prices, like methanol and ammonia. And if the Water and Sewage Authority (WASA) decides to take control of the plant at the end of the 23-year contract, the US$150m plant will cost US$3m.  That, say sources, is a “steal of a deal.” At the end of that tenure, WASA has the option to renew, but sources say that there is no indication that the state-owned company will. Desalcott has yet to recoup $147 million, sources say. After facing a barrage of criticism over the setting up of the plant, Desalcott is letting its massive intake 42-inch pipes south of Point Lisas speak for themselves. After a slew of chemical processes, through mammoth anthracite filters, and cartridges the size of a massive 12-wheeler container truck and then over specially graded sand, the water albeit salty, is pure water. Only then does the reverse osmosis process remove the salt.

From the size of the clams he says he has seen, “nobody could say that the Gulf of Paria is dying.” Thompson knows the desal plant like the back of his hand, every nook and corner.  He talks about the plant as though he put every piece together himself. “The process has proven successful and although other large desalination  plants have had major problems, we have not,” he said. “This is the first plant that has made a step forward, in theory other plants could beat our price for delivered water, as yet none have achieved it,” he said. Deputy Managing Director, Republic Bank, David Dulal-Whiteway had described Desalcott during a tour of its facilities as a cash cow.  The local banking giant last month signed a deal with the desalination company for US$112.2 million in long-term financing. But Thompson would not go so far as saying that Desalcott was a cash cow. “The way that the bridge worked.”  Thompson explained, “Desalcott did not pay any interest on the loan, interest was rolled-up and capitalised. The idea, he noted, was to get the plant up and running and let the interest accumulate on the bridge loan during construction. “In the early years, there will be little capital repayment,” he said, noting that the reason why Desalcott looked like a cash cow was that in the early years sufficient cash would be generated to pay the large amount of interest on the loan and pay the running costs of the plant.

Republic had provided US$77 million bridge financing, while Desalcott’s partners put up US$20 million. Desalcott is a 60/40 joint venture between Hafeez Karamath Engineering Services Ltd and Ionics Inc, a US-based company. The plant has a 23-year contract covering five phases (step-ups) of production to supply water to WASA at $4.46 per cubic metre. Desalcott hopes to have Phase Five up and running by February 2004, thereby increasing production from the current 22 million gallons per day to 24 million gallons plus 15% additional will then be available at half the price. Desalcott is still feeling the impact of having to pay duty on goods, sources said.  Plants in Barbados and other parts of the world are exempt from paying duty.

Although Desalcott operates with a Minister’s Licence which allows it to bring in goods duty free, sources say one of the difficulties is getting the goods through customs. Sources say there is a specific list of what Desalcott is allowed to bring in, but with a plant made up of an interminable amount of pieces, it does not make sense. On Planning and Development Minister Keith Rowley’s charge that Desalcott was also on the government’s list to be investigated, Thompson was unruffled. “I understand that an investigation was carried out last year at WASA and the Ministry of Public Utilities and the Environment.  I have heard nothing further,” he said. So sure is Thompson of Desalcott’s quality of water, that if someone had the capital they could go into the bottled water business.  “I drink it all the time,” he said. WASA, he said, asked for a maximum level of dissolved impurities of 85 parts per million, Desalcott delivers 35 parts per million.  500 parts per million is the limit for drinking water according to WHO guidelines. His guess is that companies on the Point Lisas Estate are saving on the bottom line because of the purity of the water. Even so, companies in Point Lisas do further purification for their own processes. Point Lisas uses about 15 million gallons a day.

But the water that leaves Desalcott could end up anywhere in the South of the country, he says, noting that WASA has the prerogative to do so. Of the 190 million gallons per day produced by WASA, 22 million; currently comes from Desalcott, freeing up WASA’s water throughout the country for domestic use. As for concerns that Desalcott was putting out stuff that was harmful to the environment, “We have an environmentally clean conscience,” Thompson said. On a global scale, Desalcott, sources say, is giving WASA some of the cheapest water available.  One subsidised plant in Florida charges US65 cents per cubic metre; Desalcott charges WASA 70 cents per cubic metre, but other seawater desalination plants in the Caribbean charge as much as two dollars per cubic metre. On Planning and Development Minister Keith Rowley’s charge that WASA’s TT$15 million monthly bill from Desalcott was too much, Thompson said this was not so. “Half of the TT$15 million montly bill to WASA is, of course, to recover the US$150 million capital cost of the plant and the whole bill should not be compared to the operating costs alone for other facilities.”