Enron warns against downsizing of power project • Further delay may fuel utility rate hike, inflation

A plan to issue a new request for proposal for the controversial Saipan power plant will be a “complete mistake and a disaster,” according to one of the top bidders for the long delayed project.

An Enron official also warned it will be more expensive if the Commonwealth Utilities Corporation decides to scrap the 80-megawatt plant and begin a new round of procurement for a power project with a lower capacity.

Frederick E. Lacroix, general manager of Enron Guam Piti Corp., said prices offered by current bidders will jump to reflect the rising inflation, higher interest rates and currency flactuation that have occured in the past few months.

Noting that top bidders for the present project have agreed to freeze their proposed prices while CUC assesses the need for such a plant, he said these may change at the end of the 90-day extension sought by the board.

“All these factors mean in reality our margins are shrinking and shrinking. If they start a new RFP, all bets are off. The prices are going to go up and it’s going to cost the CNMI and the consumers a lot more money,” Mr. Larcroix told reporters.

He added that another round of bidding will force the government to spend up to half-a-million dollars and further delay construction of the power plant.

“It takes three years to build the plant this size even if you scale it back,” the Enron executive explained. “You are talking millions of additional dollars overall. We view [the issuance of new RFP] as complete mistake and it will be very unfortunate.”

The Houston-based industrial giant ranked ahead of three other top competitors, including Marubeni-Sithe, in an independent evaluation conducted by Burns & McDonnell — the private engineering firm hired by CUC to clear questions on its initial review.

But the utility board last October deferred awarding of the $120 million contract to the top bidder pending assessment of the island’s actual power demand in view of the economic downturn confronting the CNMI.

While CUC will decide by next month whether to scale back the 80-MW plant or scrap it alltogether, Enron and its close competitor Tomen Consortium have pressed the board to start final negotiations now with the potential contractor and discuss ways on how to accomodate its concerns.

“What they need to do is to look at the studies they have already done. Look at the realities of economic factors,” said Mr. Lacroix.

“We are not going to come here and invest $120 million in the CNMI if we don’t think there’s any demand for power. We are not the Salvation Army, we’re in business,” he added.

Mr. Lacroix and other Enron representatives on the island met this week with some members of the Legislature to update them on their proposal, including House Speaker Diego T. Benavente who has raised the possibility to hold oversight hearing on the project to ensure that Saipan will have the power plant it needs.

Designed to meet increasing power demand on the island by the end of this decade, the project is to be constructed through build-operate-transfer scheme under a 25-year agreement touted to be the largest deal ever in CNMI’s history.