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Today, the Taxpayer Won


4/1/11 Update: Wheelabrator has decided to protest the bid and will be heard at the SWA Board meeting on 4/13 at 9:00. They will have 45 minutes to make their case and B&W will have an equal time to rebut. See Agenda for more information.


Low-cost bidder Babcock and Wilcox recommended by committee for SWA mass burn plant.

This afternoon at the Solid Waste Authority Visitor’s Center on Jog Road, the committee tasked with selecting one of the three responders to the Waste-to-Energy plant RFP met to pick a winner to recommend to the board. The three potential vendors are Babcock and Wilcox Power Generation Group (Barberton, Ohio), Covanta Energy (Spring Hill, Florida), and Wheelabrator Technologies (Hampton, New Hampshire). B&W team member BE&K operates the existing county burn plant and Wheelabrator operates one in Broward.

TAB has not been actively following the SWA budget, but when one of the teams representing a responder suggested we take a look at how the county was about to spend $800M (the bonds having been already sold), we decided to do a little research and attended the meeting.

Last month, the 7 member committee, which includes County Adminstrator Bob Weisman and Gardens City Manager Ron Ferris, scored the proposals on their technical merits, and today heard the cost side of things. Technical scoring evaluated 10 attributes and assigned scores out of 100, and considered the design, aesthetics, energy efficiency, operations and maintenance, as well as the amount of local hiring projected. Three members selected Covanta as their top choice, 2 for Wheelabrator, and one for Babcock and Wilcox, but it needs to be said that all vendors scored better than 90% in aggregate and there were no disqualifiers.

The financial attributes were analysed by a computer model created by SWA Consulting Engineer Malcom Pirnie, Inc., and used a net present value measurement to take into account energy production revenue and maintenance costs over 20 years as well as the costs of construction. Construction costs varied from a high of $830M (Covanta) to a low of $606M (Wheelabrator) – a wide spread given the closeness of the technical evaluations. On the NPV measurement though, Babcock and Wilcox was the clear winner as they actually showed a positive cash flow of $171M from energy sales and yielded a $20M/year operating cost versus $28M for Wheelabrator and $24M for Covanta. The calcuated NPV was: B&W: $500M, Covanta: $779M, and Wheelabrator: $626M.

Fifteen minute presentations by the three vendors were given prior to discussion, and both Joseph Threshler of Covanta and Jack Ristau of Wheelabrator spent their time arguing that B&W should be disqualified for violating the procurement rules. They accused their competitor with changing the corporate makeup of their team after the original Statement of Qualifications (SOQ) was decided, and that their performance bond did not meet the requirements of the RFP. They also brought up design differences where they thought B&W was inferior – namely the location of the plant’s superheater and the cladding in the lower level of the furnace. One even suggested that B&W’s own engineering handbook “Steam” suggested their design was flawed.

John Kitto of B&W put the matter to rest, stating matter of factly that each of the procedural issues had been resolved with the evaluation team. He also pointed out that if they had used the 2005 version of “Steam” instead of the 1992 edition, they would know that the thinking about the issues had changed.

Discussion and analysis by the Malcom Pirnie team supported Mr. Kitto’s contentions, and in their opinion, the proposals were so close in technical merit that the cost estimate made the choice of Babcock and Wilcox clear. The seven members of the committee agreed and voted unanimously to recommend Babcock and Wilcox to the SWA board at their April meeting. If the board (which is made up of the seven county commissioners) agrees, the contract could be signed as early as May 1.

TAB has not researched the arguments that led the board to proceed with acquisition of the burn plant, but it is supposed to greatly extend the life of the county landfill and generate significant energy as well. Picking the clearly lowest cost of the alternatives would seem to be the logical choice and if the board follows the committee’s advice the Taxpayers will win.

It would defy logic for the board to decide against the unanimous opinion of their committee, but of course that will be a political decision. The board has the ability to reopen the cost question with the vendors and re-negotiate (something the committee could not do under the procurement rules). There were a large number of IBEW union members in the audience but since there was no public comment it was not clear which vendor they preferred. We do know that other unions (carpenters and ironworkers) have protested the current plant operator (BE&K – part of the B&W bid team) because they had brought workers from out of state.

We look forward to following the board’s actions at their meeting on April 13.

Comments

3 Responses to “Today, the Taxpayer Won”
  1. Suzanne Squire says:

    This concerns all:
    PBC Tax Payers – SWA Customers – FPL Rate Payers (FPL is in for 60M on this project on top of 800M)

    Article from Forbes – Note Okeelanta Plant in WPB, Fl (State Road 80)

    The Best Quote Below:
    “If anyone comes to me with a biomass project, I may have to get violent with that person,” grumbles Brunswick County, N.C. county attorney Huey Marshall.
    The municipality is out $250,000 on a garbage transfer station built for the benefit of a now-bankrupt, $70 million waste-to-energy plant.”

    Waste Plants

    ENERGY: Want to recycle some dollars and turn them into garbage? Invest in a biomass energy boondoggle.
    When it secured financing for its $400 million garbage-to-energy plant in Robbins, Ill., Foster Wheeler (nyse: FWC – news – people) could barely contain its enthusiasm. “This will be the most modern waste-to-energy installation in the world,” puffed a 1994 company press release.

    Seven years later the plant is in bankruptcy. Workers are stripping what’s left to pay off a portion of the $320 million in outstanding revenue bonds. If they’re lucky, bondholders will get 35 to 45 cents on the dollar.

    Foster Wheeler has taken $261 million in charges so far for the misadventure. “Waste-to-energy is no longer a part of our business plan in the U.S.,” says its chief executive, Richard Swift.

    But it’s still part of the environmentalist creed. What more saintly activity could there be than to dispose of waste and produce renewable Btus at the same time? The only problem: paying the bills.

    The Okeelanta co-generation plant in Palm Beach County, Fla. was supposed to transform sugarcane waste into energy. One of two plants built with $288 million in bonds by affiliates of the wealthy Fanjul family,Pacific Gas &Electric and Bechtel, the plant got into trouble after Florida Power &Light reneged on 25-year contracts to buy its power. After a contentious lawsuit, FP&L agreed to chip in enough so bondholders could get 72 cents on the dollar.

    Worse off are bondholders stuck with $323 million in paper issued by Southern Co. (nyse: SO – news – people) for a Mobile, Ala. paper-and-pulp-fueled plant. After the nearby paper plant shut down, Southern put the biomass project in bankruptcy. Bondholders could get as little as 10 cents on the dollar.

    “If anyone comes to me with a biomass project, I may have to get violent with that person,” grumbles Brunswick County, N.C. county attorney Huey Marshall. The municipality is out $250,000 on a garbage transfer station built for the benefit of a now-bankrupt, $70 million waste-to-energy plant.

    Will investors never learn? USA Biomass recently went bankrupt trying to convert tree trimmings and other “green waste” into energy. Long before that, Combustion Equipment Associates went bust in 1980 with a scheme to turn garbage into “eco-fuel” for a power plant in Bridgeport, Conn.

    At about that time, politicians in love with eco-fuels came up with laws to force garbage collectors in a certain area to participate and to pay above-market trash disposal fees. In 1994 the U.S. Supreme Court kiboshed the notion that government agencies could win customers at gunpoint. Since 1993, according to Governmental Advisory Associates, a Westport, Conn. consultancy, 37 waste-to-energy plants have shut their doors.

    The dream goes on. There’s a federal subsidy of 1.5 cents per kilowatt-hour for electricity made from both poultry and wood wastes; five senators have proposed extending the tax credit to other forms of biomass. California, ground zero for flaky energy schemes, has handed out $57 million to 28 agricultural and municipal solid-waste biomass operators since 1998, while the federal government spent $91 million on waste-to-energy research last year.

    “Boondoggles?They’ve become disasters,” scoffs J.T. Atkins of CIBC World Markets, who has represented bondholders of the Foster Wheeler and other waste-to-energy white elephants. “Bad for the bondholders, the guys who put up the equity, and the taxpayers.”

    This concerns all:
    PBC Tax Payers – SWA Customers – FPL Rate Payers (FPL is in for 60M on this project on top of 800M)

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  1. […] largely a repeat of the points made (and rejected) in the selection committee meeting in March (Today, the Taxpayer Won), followed by B&W rebuttal and an hour long exposition of the finer points by SWA attorney. […]



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