CUC offers contract extension to Mobil

In an effort to avoid suspension of deliveries, the Commonwealth Utilities Corp. has offered Mobil Marianas a possible extension of its current contract, even as the bid process for the new contract is still ongoing.

CUC chairman Francisco Q. Guerrero made the offer in a Feb. 15 letter, where he proposed to negotiate with Mobil regarding CUC’s inability to pay $2 million of the $3.6 million due to Mobil on that day.

“Whereas CUC will not be able to meet its current obligation to Mobil Corp. of $3.6 million by $2 million due Feb. 15, 2005, the CUC board of directors agrees to start a round of negotiations with Mobil on or before Feb. 15, 2005 to arrange for a promissory note of $2 million,” Guerrero said.

He added: “Discussion will also explore the renewal clause of the current contract with Mobil, in terms of pricing, in order to extend the risk of default into the future until such time when CUC achieves financial stability.”

Mobil’s two-year contract as CUC’s fuel supplier will expire on April 30, 2005.

Last Jan. 6, CUC started accepting proposals from firms interested in supplying fuel for the power plants on Saipan, Tinian and Rota for a period of two years. Mobil and at least one other company have reportedly expressed interest in participating in the bid, which ends today.

But in an interview yesterday, Guerrero maintained that CUC will proceed with the bid. “Mobil’s contract will be expiring in April and the RFP is still going to go on,” he said.

Guerrero also reported that Mobil has assured him of fuel delivery in March, with the utility succeeding in raising funds that will help CUC remain within its $10-million credit limit with Mobil.

“We have reached an agreement with the governor and Mobil. We’re all cooperating and in good terms. There will be no more power disruption or plan for load shedding,” he said.

Earlier, Guerrero said CUC would be left with no choice but to implement regular power outages if Mobil stopped deliveries as it had threatened to do.

As of Feb. 18, CUC owed Mobil $8.1 million, including CUC’s $2-million short payment on Feb. 15. Last week’s truck deliveries and two scheduled tanker deliveries on Saipan and Tinian bring CUC’s total payables to Mobil to $10.6 million by Feb. 23.

CUC on Tuesday made a $600,000 payment to Mobil to stay within the credit limit and avoid suspension of the tanker deliveries.

Mobil however still demanded payment of the $1.4 million balance from Feb. 15, threatening to stop all deliveries until this is settled.