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Covanta Tampa Construction lives to fight another day

At a hearing on November 25, 2003 in the United States Bankruptcy Court, Southern District of New York, Judge Cornelius Blackshear refused to grant Tampa Bay Water [authority] an immediate temporary restraining order removing Covanta from its desalination facility site. The judge further refused to grant Tampa Bay Water a longer-term injunction that would have allowed the authority to operate the plant during litigation of its dispute with Covanta.

Tampa Bay Water planned to call four of its own witnesses to testify on its behalf, but the judge stopped the hearing after the testimony of only one of Tampa Bay Water's witnesses, General Manager, Jerry Maxwell, and ruled against both of the authority's requests -- the temporary restraining order and the injunction. The judge ordered the parties to attempt settlement through mediation of  the underlying issues. 

Judge Blackshear set Feb 4, 2004 as a holding date when he expects a progress report from the parties on their efforts to mediate the dispute.

Effectively this keeps Covanta in the project with three to five months of breathing room to figure out the reasons that the desal plant has not been able to sustain its required average throughput of 25 MGD with 7 day peek generation approaching 29 MGD.

Ruling saves financial life of Covanta Tampa Construction 
This ruling is viewed by Covanta Tampa Construction Company as life saving and by Tampa Bay Water as a stay of execution. 

The company has been in voluntary bankruptcy protection since October 30, 2003 -- one day before it was scheduled to begin a critical performance test. Bankruptcy prevents any change in status for Covanta that is not approved by the bankruptcy court. 

The desal project's $8.5 million per year, 30 year operating fee is Covanta Construction's only asset. Replacement on the project with another operator chosen by Tampa Bay Water would have meant certain financial death for the company. 

Covanta has not met acceptance test requirements
Tampa Bay Water contends Covanta cannot meet acceptance test requirements for the new 25 million gallon per day, $118 million saltwater desalination facility. Covanta claims its has been impeded in its efforts to dispose of reverse osmosis membrane cleaning fluid needed to keep the saltwater filters clear.

Analysts diagree on cause of problems
Industry analysts disagree on the cause of Covanta's technical difficulties. Some believe necessary pretreatment hardware was deleted by the financially ailing company. Covanta Vice President Scott Whitney states that the project is going through the necessary "optimization process" to be expected from a first-of-its-type plant that will be the largest US desal plant using new, more energy efficient, technology.

Tampa Bay Water, the owner of the project, Covanta Constructrion, the operator, Poseidon Resources, the project developer all agree that the plant can be brought up to design requirements and produce at or above specification for its full life. They all, also, agree that the fix is not expensive when divided into a 30 year facility life. Covanta would like to use the next 3 to 5 months to try to meet requirements through optimizing operations. If this fails they prefer a traditional activated carbon pretreatment to the source water. This fix should cost between $1 million and $2 million. Tampa Bay Water would like a sophisticated membrane filtration pretreatment that could cost up to $8 million to install. Poseidon Resources, now an advisor to Tampa Bay believes that specs could be met by installing a dual-sand pretreatment component as originally specified. Its cost would be greater than activated carbon but less than membrane filtration. 

At any price the fix would be cheaper than the $75 million economic loss estimated by Tampa Bay Water of running at lower water output. The output is now reduced to half of design plans by the need to clean the reverse osmosis system and replace cartridge filters four times more frequently than expected.

Desal leaves a bad taste in the mouths of new clients
Whatever the outcome several things can be certain: the plant will be retrofitted to meet standards, each party will blame the others for the cost and time over-run, and that the plans for many new desalination plants in Florida, Texas and California will be put on hold indefinitely.