CUC’s $100-M hinders Saipan power project

Commonwealth Utilities Corp. officials yesterday asked lawmakers for a bailout package that will help free the government-owned corporation from paying over $100 million debt it owed to the Commonwealth Development Authority.

The move is needed to expedite construction of the new 80-megawatt power plant on Saipan since such debt elimination is one of the conditions set out by CUC’s power consultants to lessen its financial risks.

Utility officials, led by Board Chair Jesus T. Guerrero, met with members of the House Committee on Public Utilities, Transportation and Communications to brief them on the status of the much-delayed project as well to discuss other concerns, including the debt.

CUC, CDA and the Legislature will have to sit down together to seek ways to resolve the dilemma, according to Executive Director Timothy P. Villagomez. The problem has been confronting the utility corporation for the last 10 years because of its inability to repay the loan.

“The Legislature has a lot to do with this and we are not mandated to change anything,” he told in an interview after the closed-door meeting in Capitol Hill.

“The resolution of the CUC loan to CDA has to be approved by the Legislature and the governor will have to sign it. Without the Legislature, it will not go through,” said Mr. Villagomez.

Conversion plan

The corporation took out the loan amounting to $61.3 million in late 1980’s for its various capital improvement projects, of which $40 million were used to pay for new power generators. With interests accumulating over the years, the total has reached over $109 million as of March 2000.

Both CUC and CDA are eyeing a debt-to-equity conversion plan that will give the government’s chief lending agency a substantial stake in the corporation, which utility officials hope will help keep their finances in shape before it undertakes the estimated $120 million power project.

But the swap scheme has been stalled as the board awaits legislative intervention for a possible debt forgiveness. A bill sponsored by Senate Floor Leader Pete P. Reyes and pending in the lower house has even proposed transfer of the financial liability to the executive branch.

Its proponent, however, maintained the measure would not lead to debt forgiveness, but a way to relieve a burden on CUC due to its inability to meet its obligations to CDA and concentrate in providing services to the people.

The legislation is designed as an alternative to the conversion plan which may not be proper since the money owed by CUC were not forked out by CDA at all.

The debt-to-equity swap plan has been in the planning board for the last two years since CUC approved an initial recommendation in 1998 in which CDA will get guaranteed dividends of $2 million to $3 million annually.

But before any conversion can be made, an amendment to the CUC statute must still be made by the Legislature to clarify some issues such as the number of board seats CDA must hold in the board of the utility corporation.

Mr. Villagomez also acknowledged that the lawmakers’ assistance is very vital in resolving the debt issue “that we now need to iron out and solve” together.

Land designation

The Legislature, moreover, will come into play as it needs to approve the use of public lands in Lower Base where the new Saipan power plant will be erected, he said, “whether or not we need the title.”

On other issues, the utility chief stressed they updated the House on the status of the project, including legal protests against its choice of the Texas-based conglomerate Enron to build the new plant.

Negotiations on a final deal between CUC and Enron are expected to commence within the next few weeks with hopes to begin the construction phase before yearend.

The House PUTC, which has oversight on the project, has no commitment on how to expedite the project but members had expressed concerned that the pending protests could cause further delay, said Mr. Villagomez.