Disaster Capitalism: Tiny Firm Lands Puerto Rico Power Contract

Washington Post:

For the sprawling effort to restore Puerto Rico’s crippled electrical grid, the territory’s state-owned utility has turned to a two-year-old company from Montana that had just two full-time employees on the day Hurricane Maria made landfall.

The company, Whitefish Energy, said last week that it had signed a $300 million contract with the Puerto Rico Electric Power Authority to repair and reconstruct large portions of the island’s electrical infrastructure. The contract is the biggest yet issued in the troubled relief effort.

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The unusual decision to instead hire a tiny for-profit company is drawing scrutiny from Congress and comes amid concerns about bankrupt Puerto Rico’s spending as it seeks to provide relief to its 3.4 million residents, the great majority of whom remain without power a month after the storm.

“The fact that there are so many utilities with experience in this and a huge track record of helping each other out, it is at least odd why [the utility] would go to Whitefish,” said Susan F. Tierney, a former senior official at the Energy Department and state regulatory agencies. “I’m scratching my head wondering how it all adds up.”
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Whitefish Energy is based in Whitefish, Mont., the home town of Interior Secretary Ryan Zinke. Its chief executive, Andy Techmanski, and Zinke acknowledge knowing one another — but only, Zinke’s office said in an email, because Whitefish is a small town where “everybody knows everybody.” One of Zinke’s sons “joined a friend who worked a summer job” at one of Techmanski’s construction sites, the email said. Whitefish said he worked as a “flagger.”

Zinke’s office said he had no role in Whitefish securing the contract for work in Puerto Rico. Techmanski also said Zinke was not involved.
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The scale of the disaster in Puerto Rico is far larger than anything Whitefish has handled. The company has won two contracts from the Energy Department, including $172,000 to replace a metal pole structure and splice in three miles of new conductor and overhead ground wire in Arizona.

Shortly before Maria ravaged Puerto Rico, Whitefish landed its largest federal contract, a $1.3 million deal to replace and upgrade parts of a 4.8-mile transmission line in Arizona. The company — which was listed in procurement documents as having annual revenue of $1 million — was given 11 months to complete the work, records show.

Puerto Rico has 2,400 miles of transmission lines across the island, and 30,000 miles of distribution lines with 300 substations. Jeff Hawk, a spokesman for the U.S. Army Corps of Engineers’ power restoration task force, estimated that 80 percent of the grid has been damaged. A month after the storm, about 80 percent of customers remain without power.

Rosselló said Wednesday that the island would spend $490 million on the initial phase of repairing the commonwealth’s grid, adding that “a large portion of that would probably go to Whitefish” and another contractor. The utility gave Whitefish a $3.7 million initial payment for “mobilization of personnel and equipment,” the contract says. Whitefish could be paid as much as $300 million for up to two years of work.

Under the contract, the hourly rate was set at $330 for a site supervisor, and at $227.88 for a “journeyman lineman.” The cost for subcontractors, which make up the bulk of Whitefish’s workforce, is $462 per hour for a supervisor and $319.04 for a lineman. Whitefish also charges nightly accommodation fees of $332 per worker and almost $80 per day for food.

Only eight contracts larger than $20 million have been approved for Puerto Rico by the Federal Emergency Management Agency and the Army Corps of Engineers, with half of those for shipments of food and bottled water. Whitefish’s contract surpasses the $240 million contract the Army Corps awarded to engineering giant Fluor to “augment ongoing efforts” to repair the power grid.

NBC Montana quoted Techmanski in a report Oct. 1 as saying he had asked Zinke for help in getting personnel and equipment to the territory. Chiames, the Whitefish spokesman, confirmed that “Once the company got the go-ahead from PREPA on September 26 to begin work, company executives did reach out to contacts in case they could help expedite getting qualified linesmen to the island.”

Zinke’s office said: “The Secretary always politely listens when citizens and the small business community approach him with concerns and ideas. Neither the Secretary nor anyone in his office have taken any meetings or action on behalf of this company.”

Whitefish’s Twitter feed features videos of workers dangling from helicopters and describes its progress but also suggests the work has been challenging.

In one post, a team was reported to have set up six concrete poles, but had “all day issues with material.” A crane showed up “broke and we had to fix it.” Equipment in a warehouse had rusted. Narrow roads were cited as a safety concern, as were “very large termite nests.”

Techmanski said that Whitefish was focusing on fixing key transmission lines and was using helicopters and cranes to reach them. “Once we complete those, the effort’s going to move on to other transmission and distribution systems,” he said. “So we’re just ramping up and providing as many people as we possibly can.”

Kent McNellie, an investment professional at HBC, the Texas investment firm that is now the largest financier of Whitefish, said the company’s experience reconstructing a one-mile power line destroyed in a wildfire in Washington state was more relevant to Puerto Rico’s needs than is the experience of many companies on the mainland. The span in Washington included an elevation change of about 5,000 feet, and the terrain required crews and equipment to be delivered by helicopter.

“Most guys go up in a 30-foot bucket truck, and they can do that from Texas to New York, but you don’t need an army of bucket trucks,” McNellie said. “Andy realized you had a transmission problem and that requires 90-foot buckets, 100-foot ladders and helicopters — that’s not the typical crew you can get through mutual aid.”