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CUC asks Mobil for 60-day credit term
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Posted on Jul 20 2008
The Commonwealth Utilities Corp. has asked its fuel supplier for an arrangement that will allow CUC to delay payment for fuel for 60 days.
CUC executive director Antonio S. Muña said that a 60-day credit term will buy CUC some extra time to collect from its customers before making payments to the Mobil Oil Marianas.
Muña explained that the two-month lag between the time CUC sends out billings and time they become due, compounded by the fast-increasing price of fuel, is causing serious cash problems for CUC.
In May, for instance, CUC got a $7.7 million bill for fuel, while collecting only $6.1 million in fuel charges from the March billings. Muña said CUC was forced to use $1.6 million of non-fuel charge collections to address the increase in fuel costs.
Muña argued that a 60-day credit term would benefit not only CUC, but also Mobil. “Both CUC and Mobil have something to gain by immediately implementing credit terms for fuel purchases, which will stabilize CUC working capital needs to address not only fuel purchases but non-fuel costs as well. I am sure that Mobil can appreciate the importance of CUC meeting non-fuel obligations required for continued power production which will allow for recurring purchase of fuel supply,” he said in a letter to Brian Bamba, the Guam-based commercial manager of Mobil Oil Marianas
As of Friday, CUC had yet to receive a response from Mobil about the proposal.
Muña reported that, from Oct. 1, 2007 to May 31, 2008, CUC purchased fuel from Mobil on a cash basis amounting to $50.15 million.
From February 2008 to May 2008, the price of fuel has increased nearly 30 percent. CUC’s average order of 47,421 barrels, which cost $5.8 million in February, cost $7.7 million in May.
