Covanta Tampa Construction becomes the third contractor to do so. Tampa Bay Water views the move as a way to prevent being fired from the $110-million job.
By CRAIG PITTMAN
Published October 30, 2003
The builder of the area's huge desalination plant filed for bankruptcy Wednesday, preventing Tampa Bay Water from firing the company and hiring someone else to finish the $110-million job.
Construction of the Apollo Beach plant was completed last spring, but sporadic water production has required further work.
Tampa Bay Water is counting on the plant to produce a sixth of the utility's needs - or, about 25-million gallons out of 150-million gallons a day.
But for the past five days the plant has not cranked out a single drop, utility officials say.
This marks the third bankruptcy associated with the construction of the desal plant, which ultimately is expected to be the largest in the United States. Two previous contractors, including the parent company of the one that filed Wednesday, also declared bankruptcy.
Covanta Tampa Construction filed for Chapter 11 bankruptcy in New York City, even as company officials were negotiating with Tampa Bay Water officials to avoid being fired in two weeks.
"To us this amounts to a betrayal of the public trust," said Tampa Bay Water general counsel Don Conn.
That's not the way Covanta officials see it. They say by filing for bankruptcy, they have guaranteed that they will finish the plant with no increase in cost, rather than some other contractor stepping in and doing the job for more money.
Covanta has two dozen employees working on the plant every day, trying to get it running, and this way they aren't distracted by the prospect of losing their jobs, said Covanta vice president Scott Whitney.
"We're the only ones doing anything productive," Whitney said. "Tampa Bay Water seems to be focused on public relations and finding a way to terminate our contract."
Begun two years ago, the plant is supposed to take 40-million gallons of seawater each day from Tampa Electric Co.'s Big Bend power plant next door and force it through 10,000 tightly woven membranes to produce 25-million gallons of potable water and 15-million gallons of brine.
The water goes to Tampa Bay Water's 2-million customers, while the brine is mixed with the electric company's regular discharge into Tampa Bay.
The plant's original contractor, Stone & Webster, went bankrupt in 2000. A year later its replacement, Covanta Energy, filed for Chapter 11 too. Tampa Bay Water stuck with the company, which the utility's general manager, Jerry Maxwell, defended as the only way to keep construction moving forward.
At Tampa Bay Water's insistence, Covanta created a subsidiary that would continue building the plant.
That subsidiary, Covanta Tampa Construction, has one asset: the contract to build the desal plant.
"It has no other existence on Earth," Maxwell said earlier this week. "If they bankrupt it, they will prevent us from going in and effecting a repair."
Although construction is done, the key to completing the plant is a 14-day test to show that everything is running smoothly.
Covanta ran the test in May but failed to satisfy Tampa Bay Water, which was concerned about problems that could drive the operating cost above the budgeted $10-million a year.
It noted 17 problems, not the least of which was the filters clogging more frequently than expected, which required cleaning more often and with a stronger solution.
Covanta officials have blamed the clogging on Asian green mussels that stick to the intake grates.
The need to change and increase the cleaning solution for the membranes caused a bigger problem. Hillsborough County balked at allowing large quantities of the cleaning solution to be disposed of in its sewer system, so Covanta was forced to store 2-million gallons in tankers parked around the site - a glitch Covanta blamed on Tampa Bay Water.
In June, the utility gave Covanta until Sept. 30 to successfully complete the 14-day test. When Covanta failed to meet that deadline, Tampa Bay Water's board voted to find the company in default of its contract.
A default meant the company would face $465,000 in fines, as well as a requirement that it hand over 306-million gallons of free water. But it would still have until Nov. 17 to fix the problems.
If Covanta still had not completed the test successfully by Nov. 17, though, the board said it would fire Covanta and use a $23-million performance bond - guaranteeing the completion of the plant - to hire a replacement to finish the work.
Conn, general counsel for Tampa Bay Water, said that during negotiations on Tuesday Covanta officials said they could not start the two-week test on Nov. 3, the last possible date on which to start and still finish the test by Nov. 17.
Conn said the bankruptcy filing appeared to be a defensive action "to protect them from inevitable termination."
Because the company's sole asset is its Tampa Bay Water contract, any attempt to fire Covanta requires approval of the bankruptcy court judge, Conn said.
The same goes for the $23-million performance bond: Tampa Bay Water cannot claim that money without getting a judge's approval.
The company filed for bankruptcy in New York because that's where its parent company filed too, Whitney said.
The New York City bankruptcy court "is a very popular destination for bankruptcy filings," Whitney said, so getting a hearing could take a while.
Since all the company's assets are in Florida, though, Tampa Bay Water may file an emergency motion to move the case here, as well as challenging whether the company can really call itself bankrupt at this point, Conn said.
- Times staff writer John Hill and researcher Caryn Baird contributed to this report.
