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‘Projected power sales to pay for Aggreko contract’
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Posted on Jul 13 2008
The Commonwealth Utilities Corporation has sworn there were funds for its temporary power contract based on a prediction that the resulting 24-hour power service would pay for the deal.
CUC executive director Antonio Muna gave this explanation following an inquiry from the Legislature about a funding certification clause in the CUC-Aggreko contract.
In the document, CUC’s acting chief financial officer certified “there are sufficient funds available for the execution of this contract.” Yet, CUC is asking the Marianas Public Land Trust and the Legislature to provide money to pay Aggreko.
In a letter to the Legislature, Muna said the certification language is “currently standard for all CUC contracts…[and] is prospective in nature.”
“Payment of liabilities arising from the Aggreko contract will be from realization of projected revenue increase as a result of 24-hour power service, plus cost savings as a result of not having to implement a load shedding schedule, manage a blackout, and using more efficient generators,” he added.
Under the Aggreko contract, CUC must make an initial payment of $1.5 million before Aggreko ships the rental generators. The monthly rent will cost $336,000 or $504,000, depending on whether CUC avails of 10 MW or 15 MW of electrical power.
Based on CUC calculations, the utility can save $308,012 a month in overtime and non-personnel costs associated with having to implement power outages, as well as in fuel and lube costs entailed by using existing, less efficient engines.
CUC also expects its sales to increase once it is able to provide 24-hour power service.
“[Our] analysis concludes that the cost of power production for the Aggreko engines can be borne by projected cost savings plus increase in non-fuel revenues to the extent of a projected surplus of $792,000 for the 12-month operating period,” Muna said.
CUC is trying to get a $4.5 million loan from MPLT to pay part of the contract amount and to settle debts to other contractors, including Telesource CNMI and Pacific Marine Industrial Corp., which operate the Tinian power plant and the Puerto Rico power plant, respectively.
The loan request requires approval by the Legislature.
