Debt-to-equity conversion of CUC loan shelved

Almost one-year and a-half after it was announced, the Commonwealth Development Authority has temporarily shelved the planned debt-to-equity conversion with the Commonwealth Utilities Corp. pending the resolution of the 80-megawatt power plant project, according to CDA Board Chairman Juan S. Tenorio.

CUC’s debt to CDA has now ballooned to $105 million from only $61.3 million in June 1997, according to Tenorio.

The utilities corporation has stopped payment of its debt to CDA, which has in turn given the CUC a grace period until next year.

Some $10 million of CUC’s loan to CDA was used to pay Japanese industrial giant for the generators its purchased in the past.

The CUC board has withheld the selection of firm that will build the 80-megawatt power plant for the next three months pending assessment of the need for the project with such magnitude.

At the same time, the utilities board will have to further review the report made by Burns & McDonnell, an independent firm that evaluated results of the various bids on the controversial Saipan power plant project that generally countered the decision to award the $120 million contract to Marubeni-Sithe.

While CDA has not reneged on its promise to help the utilities corporation become financially independent, Tenorio said, he believes that there are still some issues which must be resolved before the debt-to-equity conversion plan can push through.

“We don’t want to jeopardize the power plant project of CUC because this might have a different effect to the investors,” he added.

Before this can be carried out, the CDA chairman said an amendment to the CUC statute must be made by the Legislature to clarify some issues like the number of board seats CDA must hold in the CUC board. “We are not really interested in running CUC because we have faith in the present board members and management,” said Tenorio.

He said a meeting with the governor and the Legislature will be made to discuss the issues that need to be resolved in connection with the debt-to-equity conversion. “The final blessing will still come from the CNMI officials. We need their stamp of approval,” said Tenorio.

In the meantime, CDA is watching the financial situation of the utilities corporation, its expenses and future borrowings. “If it wants to borrow money, we want to have a say on that to protect the taxpayers,” he said.