CUC seeks advance payment from big customers

The Commonwealth Utilities Corp. will be seeking advance payment from its large customers in order to raise the $3.7-million it needs to pay Mobil Oil Marianas due this month.

In an emergency meeting yesterday, the CUC board of directors voted unanimously to allow management to open negotiations with large customers who are willing to make advance utility payments at a maximum interest of 12 percent.

Meanwhile, the board deferred action on the plan to implement load shedding, pending the management’s presentation of an action plan to the board.

In an interview, CUC chair Francisco Q. Guerrero said CUC is planning to approach customers whose utility payments average more than $100,000 a month to make advance payments.

So far, at least one customer—Joeten Enterprises Inc.—has reportedly expressed willingness to help the utility corporation. Joeten, which pays CUC a monthly average of $200,000, is looking at making an advance payment of $1 million, Guerrero said.

Based on preliminary discussions with Joeten, CUC will be paying the amount, plus 12-percent interest, in installment over a period of 12 months.

Guerrero expressed belief that a 12-percent interest deal is fair enough, noting that banks normally charge as much as over 20 percent. “At this time that CUC is facing a lot of financial problems, it’s not expensive,” Guerrero said.

CUC needs to raise about $3.7 million before Mobil makes its fuel deliveries scheduled for May 8 and May 16.

According to Guerrero, the implementation of load shedding depends on whether or not CUC meets the May fuel payment.

The utility firm is currently negotiating with Mobil regarding their fuel supply contract, which expired last April 30. Mobil is the only company that responded to CUC’s request for proposals for the new two-year contract.

Guerrero said the board is seriously considering its option to scrap the entire RFP and put out a new request because Mobil’s offer is too expensive.

“If we’re going to take up Mobil on its offer, we’re going to be paying $70 million annually for the next two years. That takes about 90 percent of our total budget,” Guerrero noted.

Nevertheless, the CUC board adopted last week a resolution allowing the management to seek a letter of credit for up to $10 million to meet Mobil’s condition for the signing of the contract.

Yesterday, Guerrero reported that CUC is applying for a security of payment from Bank of Guam. The utility firm has also approached the Marianas Public Land Trust for the purpose.

In its fiscal year 2006 budget, CUC allocated $51.56 million of its $83.29-million budget on fuel. The fuel budget represents an increase of $16.51 million or 46.8 percent, as compared with FY 2005, and an increase of $20.70 million or 66.6 percent as compared with the FY 2004 budget.