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$10M LOC proving elusive for CUC
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Posted on May 10 2005
The Commonwealth Utilities Corp. is still scrambling to locate a $10-million letter of credit to satisfy Mobil Oil Marianas’ condition for signing a new fuel supply contract.
Yesterday, CUC officials met for the second time with the Marianas Public Land Trust to seek a guarantee from the agency. However, both government entities have yet to reach an agreement on CUC’s request.
Herman P. Sablan, vice chair of the CUC board of directors, said MPLT made a counter-proposal to CUC’s offer, the details of which he could not disclose as yet.
But Sablan expressed hope that a final decision would be made before the CUC board’s meeting at 2pm today. CUC wants to sign a new one-year contract with Mobil by Friday, he said.
“Our objective is to get the whole $10-million letter of credit as fast as possible. We don’t want to continue operating without a contract,” Sablan said.
CUC’s two-year contract with Mobil expired on April 30.
CUC had also eyed seeking a letter of credit from Bank of Guam. While the bank was accommodating, CUC did not have enough time to go through the private institution’s procedure for issuing letters of credit, Sablan said.
Upon Mobil’s demand, the CUC board adopted a resolution on April 28 authorizing management to seek a letter of credit amounting up to $10 million.
Mobil, the sole company that responded to CUC’s request for proposals for fuel supply, had required CUC to provide a security for payment as a contract condition. The oil company set the condition amid CUC’s failure to make prompt payments during the past several months.
According to the resolution, CUC management may pledge CUC assets, valued at $10 million or less, as collateral for the letter of credit.
Further, CUC chair Francisco Q. Guerrero was authorized to execute, on behalf of the board, any documents requiring board approval in connection with obtaining a letter of credit or with the pledge of assets.
