UPM abandons ‘untenable’ Dart deal with ReGen: Cayman News Service

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(CNS): The Cayman Islands government is pulling out of an agreement it signed with a Dart-led consortium to address the country’s waste management problems and build a waste-to-energy facility. The news became UPM’s worst-kept secret when CIG confessed that negotiations to reach a final agreement had failed, nearly 2,500 days after the previous PPM-led government signed a last-minute deal with the islands’ wealthiest developer, Sustainability Minister Katherine Ebanks-Wilks confirmed on Thursday.

In response to a question from former premier Wayne Panton, who was previously minister of sustainable development and was the first to tell the nation there were significant challenges to the initial agreement signed by the Progressives weeks before the election, Ebanks-Wilkes revealed the government would withdraw from the project and “take the necessary steps” to end it and start over because it was “unsustainable.”

“Achieving modern, sustainable and affordable solid waste management solutions remains a priority for government,” she said in response to Panton’s questions and before releasing her full statement. But she said the deal was unaffordable.

Dart was selected as the successful bidder in October 2017, but negotiations for the ReGen waste management project, which began at that time, lasted nearly seven years. After PPM signed a pre-agreement, Dart was allowed to start remediating the actual dumpsite and began covering up the site of the dumpsite – the dump. Many saw this as a major mistake as it deprived the government of a major bargaining chip in the negotiations.

The new minister, who took over as minister last October following a cabinet coup that ousted Panton, faces a November 30 deadline to reach a deal on the complex and troubled project.

In her full statement, she told Parliament that there were still some unresolved issues that would prevent the parties from completing the transaction by the deadline, so a new date had to be agreed. At the time, Cabinet considered that the transaction needed to be reviewed before a new financial closing date could be set, but there were still some major issues that had not been resolved, including risk, liability, compensation and insurance issues, as well as local company control issues.

The power purchase agreement between Dart, CUC and the government for waste-to-energy has also been problematic and protracted. As a result, it has been taken out of the negotiations so that the ministry and Dart can focus on the remaining costs and other aspects of the deal.

“Essentially…if we complete the project agreement, we will have no customer – the only customer on the island,” she said. Ebanks-Wilks explained that completing the deal without this issue being resolved could result in the government not being able to secure a competitive price per kilowatt-hour. “So the government will have a contract to sell energy while the only customer to buy it, CUC, has not signed an agreement.”

The minister said the government had been expecting energy costs in power purchase agreements to be around 15 cents per kilowatt-hour, but that figure had not yet been agreed. She noted the cabinet review had revealed a series of challenges that went back to the original business case.

She said that taking all of this into account, the Cabinet decided that it was time to consider terminating the project agreement. Explaining the potential issues associated with this, she confirmed that neither party had any liability for the existing deal.

“We need to find a more affordable option for the future,” Ebanks-Wilks said. She noted the deal has a huge impact on the state budget every year and said CIG could be in violation of Fiscal Responsibility Framework Fees would have to be raised to cover the cost of the program, and given current inflation rates, it would have been too much.

“This is not a decision that the cabinet has taken lightly,” she said, adding that the government remained committed to finding a solution. “We need to move away from landfilling as the primary method of dealing with solid waste as it is essential for the country’s continued sustainable development.”

Clearly, a solution, while necessary, must be affordable now and in the future, but the root of the problem lies in the agreement that the Progressive Party originally signed, she said. As years of rigorous negotiations failed to resolve a range of issues, the cabinet decided that the goal was to find a solution to the agreement that would satisfy both CIG and Dart.

Ebanks-Wilkes echoed comments made many times by Panton when she was Minister of Sustainable Development, saying the deal left by the PPM was far from a complete agreement and that there were just some loose ends that needed to be worked out. Given the many unresolved issues in the proposed contract, she said it was no wonder it took so long to reach an agreement.

Deadlines were pushed back repeatedly to push the project to completion, but it became clear that the costs and risks of CIG’s largest ever project were “unbearable.” “The decision was made based on facts and data,” Ebanks-Wilks said.

She acknowledged people would worry that the significant investment so far would be wasted, but that was not the case. She said the remediation of the old dump, which cost about $23 million, was a separate and important part of the overall cleanup and the government had learned a lot that would prepare for the new round of bids.

The government is currently reviewing the policy and its original strategic outline, but she said CIG would be better placed to respond to the next, more successful tender.

The Ministry of Environmental Health said that with the current amount of waste input, the landfill can be used for another five or six years as long as there is no major hurricane. However, she said the government is clear that lessons need to be learned and a revised project that meets the government’s needs needs to be tendered, and the tender process will be launched as soon as possible.

Panton pointed out the complexity of the project and asked why the government thought the new tender would be cheaper. The minister could not fully explain this but said that given all these concerns, CIG would terminate the project.

In response to Chris Saunders’s call for the government to release the value for money report prepared by the Auditor-General, Ebanks-Wilkes falsely suggested that Cabinet had no power to decide whether to release the report.

Joey Hew, the minister in charge of the project when the PPP-led government signed the deal and the brother of the CUC president, asked about the problems on the CUC’s part. Ebanks-Wilkes responded that while there were problems on that front, it was by no means the only issue that led to the failure of the negotiations.

Hew also worried that the landfill might not last more than five or six years. He asked if the government was considering building a second landfill and how to manage the bad smell throughout the area. Ebanks-Wilks said the government was confident that the existing landfill would last at least five years and that it would be properly managed.

Opposition Leader Roy McTaggart asked the minister about the final estimated cost of the ReGen-Dart deal, saying he could not understand how the cost had gone from $620 million to $2 billion as some had said.

However, the minister said she would not reveal the information as a new round of bidding procedures was about to begin, saying the government would release as much information as possible in the future.