(CNS): The Cayman Islands Government is going through the process of withdrawing from the deal it signed with a Dart-led consortium to take on the country’s waste management problem and the construction of a waste-to-energy facility. What had become the UPM’s worst kept secret was finally revealed in parliament on Thursday when Sustainability Minister Katherine Ebanks-Wilks confirmed that almost 2,500 days after the previous PPM-led government signed the last-minute deal with the islands’ wealthiest developer, the CIG has come clean that the talks to reach a final deal have failed.
Answering a question from former premier Wayne Panton, the previous sustainability minister who was the first to tell the country that there were significant challenges with the preliminary agreement signed by the Progressives just a few weeks before the election, Ebanks-Wilks revealed that the government was pulling out and “taking the necessary steps” to end it and start all over again because the project was “untenable”.
In response to Panton’s question and before she gave the full statement, she said, “Achieving a modern, sustainable and affordable solid waste management solution remains a top priority for the government.” But she said that this deal was unaffordable.
Dart was picked as the preferred bidder in October 2017, but discussions that began then on the ReGen waste management project rolled on for almost seven years. After the PPM signed a pre-deal, Dart was allowed to begin remediating the actual dump and began covering up Mount Trashmore, as the dump is known. Many saw this as a major mistake because it removed the government’s main leverage in the negotiations.
After she took over as the minister in October last year, following the Cabinet coup that ousted Panton, the novice minister was faced with a longstop deadline on 30 November to reach a deal on the complex and troubled project.
In her full statement, she told the parliament that there were still outstanding issues that had not been agreed upon that would have prevented the parties from being able to meet the deadline, so a new date would have to be agreed. At that point, Cabinet believed it needed to review the deal before setting a new date for the financial close, but there were some major unresolved issues, including risk, liability, indemnity and problems with insurance, as well as the matter of local company control.
The power purchase agreement between Dart, CUC and the government regarding the electricity generated by burning the rubbish was also problematic and protracted. As a result, that element had been taken out of the talks to allow the ministry and Dart to focus on the rest of the deal’s costs and other problems.
“Essentially… if we closed on the project agreement, we did not have a customer secured — the only customer on the island,” she said. Closing without that being resolved could leave the government unable to secure a competitive price per kilowatt hour, Ebanks-Wilks explained. “So the government would enter into a contract to sell energy, and the only client to buy the energy, CUC, had not yet signed the agreement.”
The minister said the government had always anticipated that the energy costs in the power purchase deal would be around 15 cents per kilowatt hour, but that had not been agreed. The review by Cabinet revealed a long list of challenges going all the way back to the original business case, she noted.
Given all of that, she said, Cabinet had decided it was time to consider terminating the project agreement. Explaining the potential issues relating to that, she confirmed there were no liabilities on the parties over the existing deals.
“We need to find a more affordable option for the future,” Ebanks-Wilks said. Pointing out how big an impact the deal would have on the country’s budget every year, she said the CIG could risk breaching compliance with the Framework for Fiscal Responsibility if it didn’t raise fees to cover this project’s cost, and given the current rate of inflation, this would be too much.
“This decision by Cabinet was not taken lightly,” she said, adding that the government remained committed to finding a solution. “We need to move away from landfilling as our main method of dealing with solid waste as it is essential to the continued sustainable development of the country.”
It was apparent that the solution, while necessary, had to be affordable now and in the future, but the problems were rooted in the original deal signed by the Progressives, she said. Since the years of rigorous negotiations had failed to solve a litany of problems, Cabinet had decided that the goal was to find a way out of the deal that was agreeable to both the CIG and Dart.
Echoing what Panton had repeatedly stated when he was the sustainability minister, Ebanks-Wilks said that the deal left by the PPM was far from a full deal that merely required a few loose ends to be tied up. Given how much of the proposed contract was unresolved, she said it was no wonder it had taken so long to try to agree a deal.
The deadline had been repeatedly pushed back to try to move it forward, but it became clear that the costs and risk for the largest project ever undertaken by the CIG were “untenable”. Ebanks-Wilks said, “The decision was based on facts and figures.”
She accepted that people would be worried that a major investment to this point would go to waste, but that was not necessarily the case. The remediation work on the old dump, which cost around $23 million, was a separate and important part of the overall clean-up, and the government had learned a lot, which will position it well for a new bid, she said.
The government is now reviewing the policy and the original strategic outline case for it, but she said the CIG would be in a good position to manage a much more successful tender next time.
With the current waste input, the Department of Environmental Health has said that it can use the landfill for another five or six years, provided that there are no major hurricanes. However, she said the government was well aware that it needed to apply the lessons learned and tender a revised project that would meet government needs, and it would begin the tender process as soon as possible.
Panton noted the complexities around the project and asked why the government believes a new tender would cost any less. The minister was unable to fully explain this but said that, given all the concerns, the CIG was going to end the project.
Chris Saunders asked the government to release the value-for-money report conducted by the auditor general. In response, Ebanks-Wilks wrongly suggested that it was not Cabinet who could decide whether or not to release it.
Joey Hew, who was the minister in charge of the project when the PPM-led government signed the deal and is also the brother of CUC’s president, asked about the problems with the CUC element. Ebanks-Wilks answered that while there were problems with that aspect, it was by no means the only issue that had sunk the negotiations.
Hew also raised concerns that the landfill would not last another five to six years. He asked if the government was considering a second site for landfilling and how it planned to manage the terrible smell throughout the area. Ebanks-Wilks said the government was confident it could get at least five years from the existing dump and, in the meantime, the dump would be properly managed.
Opposition Leader Roy McTaggart asked the minister about the final projected cost of the ReGen deal with Dart, saying it was impossible to understand how it had gone from $620 million to $2 billion, as has been suggested.
However, the minister said she was mindful of revealing that, given that a new tender process was about to begin. She said that the government would release as much information as it could going forward.
See the minister deliver the full statement below on CIGTV: