OPA report to prove need for CDA’s takeover of CUC

Results of the audit investigation being carried out by the Public Auditor on the Commonwealth Utilities Corporation will determine whether a management takeover is necessary.

Commonwealth Development Authority Board Chair John S. Tenorio said OPA determines that CUC amassed revenues in recent years but failed to settle its multi-million outstanding debts, CDA will immediately tap an independent management firm to handle its fiscal responsibilities.

Mr. Tenorio said the problem does not end with the settlement of CUC’s $150 million debt. He said CDA’s concerns include the disclosure of across-the-board salary increases, travel expenses, anniversary bonuses, and hiring of more than 35 employees amid cost-cutting measures.

The board chair revealed that following reports of CUC’s wanton spending, OPA immediately called for a comprehensive evaluation of the present financial status of the utility corporation.

CDA legal counsel Vicente Salas likewise noted that an OPA probe will determine the culpability of CUC officials on the power firm’s $150 million delinquent loans. Mr. Salas maintained that under the Special Representatives Agreement, CDA has the authority to take over financial management of the utility corporation.

OPA stepped in after House Committee on Public Utilities, Transportation and Communication Chair Rosiky Camacho threatened that breach of fiduciary duties of its officials may result to termination of the power firm’s government-issued perks.

The latest report submitted by CUC comptroller Ed Williams revealed that CUC has incurred an estimated $1.8 million in revenue losses to date.

For 2001, CUC is operating at a loss of $1.8 million compared to operating income of $3.9 million in year 2000.

A CDA takeover of the utility corporation could ensure smoother relationship and guaranteed repayment of CUC’s obligation.

CUC and CDA entered into a loan agreement, stipulating the corporation’s obligation to repay the loans plus interest. Such obligation had been acknowledged by CUC and bargained for by CDA.

The government’s lending arm has fiduciary responsibilities, especially the need to safeguard CDA’s assets and preserve its financial vitality, according to CDA Executive Director MaryLou S. Ada in an earlier interview.

In order to resolve the issue, officials earlier explored the possibility of converting CUC’s over $100 million debt to equity primarily because it would also serve the financial books of the utility corporation better than merely transferring its credit from the Commonwealth Development Authority to the executive branch.

CUC is more likely to easily secure future loans from private financing companies if its $100 million liability is converted into equity. Equity conversion would also give the government a commanding stake in CUC should plans to privatize the utility firm push through.

However, the Senate has taken steps to legislate the transfer of CUC’s liability from the government’s lending arm to a special account to be created within the Department of Finance.

The Senate’s move will block plans to retire CUC’s financial obligation through equity conversion.

The funds loaned out to CUC came from a bond float that used the Capital Improvement Project grants from the federal government as collateral, with CDA acting only as conduit so that the money would be released. (EGA)