Published On: Wed, Apr 18th, 2018

Amended water contract saves millions

Jim Rosen - Emil Lee - Franklin Richards - Miklos Giterson - Water Contract

PHILIPSBURG – Minister Emil Lee (Public Health) has negotiated an amendment to the contract with public drinking water supplier Seven Seas, in close cooperation with VROMI-Minister Miklos Giterson, Finance Minister Mike Ferrier and utilities company GEBE. The amendment will save the country approximately 4 million guilders ($2.2 million) per year  for the next three years.

In 2016 the government amended the pay or take contract with Seven Seas under which the country was obliged to take 18,500 cubic meters of water per day instead of 15,500 cubic meters. The change went into effect in 2016.

Under the pay or take contract the country bound itself to paying Seven Seas an x-amount for a fixed amount of water – used or unused. “In 2016 the production was more than the country was able to consume,” Minister Lee said at Wednesday’s Council of Ministers press briefing. “It resulted in a loss of 1.1 million guilders. We were not worried about it at the time because there were signs of economic growth and possibilities for contracts to sell water to the French side and to the cruise lines. But Hurricane Irma changed everything.”

Due to the destruction of major water consumers, mainly hospitality projects, the losses threatened to go up to around 4.6 million guilders a year.

The ministry negotiated a new contract with Seven Seas whereby the fixed amount of water the country will pay for is brought back to pre-2016 volumes – 15,500 cubic meters per day – in exchange for an extension of the contract for three years.

Minister Lee said that in time utilities company GEBE aspires to take over the water production and with that thought in mind, the amended contract contains an early buy-out clause.

The contract also includes a clause about scholarships. The Seven Seas scholarship fund currently contains $240,000. “We broadened the terms that establish who can access this fund,” Minister Lee said. “We want to train people in water production to enable the country to take over from Seven Seas in the future.”

###

Official Press Release from Minister Lee’s office

Minister of VSA, Emil Lee announced on Wednesday April 18th, that negotiations for the amendment of the contracts for the supply of public drinking water, produced by Seven Seas Water have been concluded and signed off in a positive and desirable savings of four (4) Million guilders annually for a period of three (3) years. As Minister of Public Health, Emil Lee is responsible for the public supply of drinking water. Negotiations took place together with the Ministry of VROMI who is responsible for the distribution of drinking water and the Ministry of Finance.

“Prior to hurricane Irma, the country was already in a situation where the water being produced was more than the actual consumption capacity. As a result, the generated loss in 2016 was 1.1. Million guilders. We took the time to examine the current contract with Seven Seas. It is a ‘take or pays’ contract, meaning that whether the country takes the water or not – by agreement, the country is obligated to pay for the contracted production of water. And that loss, in terms of water that is paid for but consumed, was projected to be about 4.6 Million guilders annually.” – Emil Lee, Minister of Public Health

Based on an agreement that was signed in 2012 between Government and Seven Seas Water; as per 2016 the daily amount of water to be made available was raised from 15.500 m3 per day to 18.500 m3 per day. The amendments consist of Government reverting to the pre-2016 volumes of 15.500 m3 daily, in exchange for the extension of the agreement, with the possibility to extend for two (2) more years thereafter.

“That gives us some breathing room in terms of cash flow; it allows us to get the hotel plants back in operation and it allows us to finalize discussions and negotiations with the French side, with the Harbour and the cruise lines as possible clients to sell water to.” – Emil Lee, Minister of Public Health

It is the desire of G.E.B.E to independently produce drinking water for the country; the contract with Seven Seas Water makes provisions that allows the possibility for the country to negotiate an early buy out of the contract. The negotiated amendments to the contract includes the expansion of the applicant criteria to the scholarship funds of the Desalination Resource Development Program (DRDP), which is part of the water contract with Seven Seas Water. There is currently 240.000 dollars in the scholarship fund; the fund allows students to specialize in water engineering.

“We have broadened the terms that allow a broader participation of who can access the scholarship funds with the understanding that what we are trying to do is we are trying to train individuals in water production on Sint Maarten, equipping the country to be able to take over the water production on its own in the future.” – Emil Lee, Minister of Public Health