CDA opposes gov’t guarantee for project

The Commonwealth Development Authority has strongly opposed a proposed legislation that seeks to require the government to issue a guaranty for the construction of the 80-megawatt power plant on Saipan in fear it would violate procurement regulations and constrain the utilities corporation from undertaking a similar project in the future.

In a Senate bill extending full support to a conglomerate chosen by the Commonwealth Utilities Corporation to build the $120 million power project, CNMI will assume all financial liabilities of CUC should the latter fail to meet its obligation under an independent power purchase agreement.

While CDA says it supports the passage of the proposal to fast track the power plant expansion program, it is apprehensive on the impact of provisions that would seek a 25-year full faith and credit backing from the island government.

“CDA is especially sensitive about any guarantee to which the CNMI government is committed. Frequently, CDA is the entity called upon to bail the government out and pay on the guarantee,” board chairman Juan S. Tenorio wrote to Rep. David M. Apatang, head of the House Committee on Public Utilities, Transportation and Communications. “Continuation of this pattern is seriously hampering CDA’s statutory duties towards the people of the Commonwealth because the source of our funds is limited.”

Tenorio proposes the inclusion of provisions that would ensure CUC settles it long-overdue obligation to CDA amounting to over $90 million once the utility company improves its financial position and the sole provider of energy to the islands.

“Such provision would help provide the future financial viability of CUC,” Tenorio said.

Short of cash, CUC has chosen Marubeni Corp. of Japan and its US-based partner, Sithe Energies, Inc. to construct a new power plant for Saipan through the build-operate-transfer scheme in which the contractor will generate power for purchase by the utilities company. After 25 years, CUC will assume ownership of the power plant.

Under a controversial deal worked out with Marubeni-Sithe, CUC will pay each month a capacity charge of $1.45 million on top of about $593,110 for operations and maintenance and .00125 cent per kilowatt hour during the initial run of the power plant.

The construction of the 80-megawatt plant, which was designed to address the growing power demand on the island, has been stalled since middle of last year due to protests lodged by losing bidders.

Industrial giant Enron and consortium Alsons, Tomen, Singapore Power and Tan Holdings Corp. have separately questioned the proposal of Marubeni and the competence of CUC’s in-house selection committee.

CUC officials were forced to abort the deal with Marubeni-Sithe upon recommendation of the Office of the Public Auditor and hiring of an independent evaluator that will conduct a fresh round of review of 13 proposals initially submitted to the utilities corporation.