CUC payables to CDA reach $150M

The Commonwealth Utilities Corp. has registered some $150 million in payables mainly to the Commonwealth Development Authority, involving four unpaid notes and related accrued interests.

In a financial report submitted recently to the CUC Board of Directors, CUC said that it has been in default of the repayment of four notes to CDA totaling about $61.6 million, plus related accrued interests totaling about $81.2 million.

In addition, CUC has two long-term debts totaling $7.2 million: $7.002 million with Telesource for a 10-megawatt power plant on Tinian and a $203,000 debt with the U.S. Department of Agriculture, Rural Development for water projects on Saipan.

CUC said the CDA payables consist of four sets of loans: $30 million; $16.1 million; $5.5 million; and $10 million.

CUC said that, in light of an internal control audit findings, it requested a legal opinion to determine if CUC is in fact liable to repay the $10 million, which is considered a loan but is an unsigned agreement.

As of March 31, 2004, CUC said that it has a working capital deficiency of $122 million—current assets of $38 million minus current liabilities of $160 million.

This sets the CUC’s current ratio at 0.24. A ratio of less than 1 indicates a low margin of safety. This low ratio is due to the classification of the four CDA notes payable and related accrued interest as current liabilities, CUC said.

Meantime, CUC reported over $31 million in receivables, including $16.2 million (53 percent) from the government and $14.5 million from residential and commercial customers.

Of the $14.5 million due from residential and commercial customers, CUC estimates that about $8.6 million or 58 percent is uncollectable.

Included in the uncollectable amount is about $825,000 that is due from 21 customers who has easement claims against CUC. These customers, CUC said, are seeking compensation for utility service lines that cross their properties.

Until such time that the amount of compensation is agreed upon, these customers would not pay a part or all of their utility bills. CUC said that administrative hearings have been held and CUC is awaiting the outcome to pursue collection, should it be in favor of CUC.

Meantime, of the $22.9 million in utility receivables in default, over $13.8 million or 60 percent are due from CNMI government agencies.

Other receivables total over $1.1 million. These are $383,000 from a federal and CNMI grantor agencies for capital improvement projects and other assistance; $431,000 from vendors for prepaid repair parts and supplies; $26,000 from CUC employees, board members, and CNMI government officials for travel advances; $107,000 from a vendor for the refund of the advance payment for an undelivered Rota generator; and $153,000 in miscellaneous receivables.

CUC reported a restricted cash totaling over $18.3 million reserved for utility customer security deposits, contract payments for refurbishment of power generation equipment, operations and maintenance of power, sewer, and water systems; and escrow for a loan agreement, and funds advanced by grantor agencies for CIPs.

As of March 31, 2004, CUC said it has over $8.9 million in security deposit fund: about $7.5 million in time certificates of deposits and over $1.4 million in a checking account.

These funds, established in 1992, are used to refund deposits or offset account balances for accounts that are terminated or disconnected involuntarily for nonpayment.