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Pacific Islands
Development Program/East-West Center With Support From
Center for Pacific Islands Studies/University of Hawai‘i

By Gaynor Dumat-ol Daleno

HAGATNA, Guam (Pacific Daily News, Aug. 8) - Guam Power
Authority saw electricity sales shrink by $27 million to $203 million in fiscal
2002 while it was burdened with what the public auditor called a very high
amount of receivables, which totaled $100 million.

The numbers come from the public auditor and from a report on
GPA's latest annual financial health check, which shows unpaid government of
Guam power bills as the single largest cause of the power agency's financial

Bruce Pecon, GPA's chief financial officer, said the shrinkage
in sales can be attributed in part to Guam's weakening economic conditions.

Typhoon Chata'an, which knocked out power to most of the island
for weeks, also reduced the power agency's revenue, according to Pecon.

Of the $100 million in accounts and note receivables, the
government of Guam and some local government agencies account for 51 percent, or
$51.5 million, according to Public Auditor Doris Flores Brooks' summary of the
audit's findings.

The agency's sales and receivables can be viewed this way: For
every dollar worth of electricity it sold, it had 50 cents of receivables to

And of the 50 cents, nearly 25 cents is owed by GovGuam,
according to Brooks.

The power agency ended the previous fiscal year with $30 million
in unpaid bills owed by private customers, according to findings of the audit,
conducted by Deloitte Touche Tohmatsu.

The total receivables include $10 million that the power agency
expects to be paid by the Federal Emergency Management Agency for reimbursement
from Supertyphoon Paka-related costs in 1998, according to Brooks' summary.

Gov. Felix Camacho's plan to borrow $218 million on the bond
market has been identified as a source of payment for $30 million of the local
government's unpaid power bills.

But the bond-borrowing plan, authorized by law since April,
faces a host of challenges, including Attorney General Douglas Moylan's
objection. He's concerned that the island appears to have exceeded its federally
established debt ceiling.

GovGuam's credit rating also has been downgraded, which,
according to the report, may complicate GPA's efforts to get paid on some of the
GovGuam receivables.

Pecon said without the $30 million from the proposed bond
borrowing, the power agency may not have enough to pay GPA's bond debt
obligation, which is about $27 million a year.

Failure to make timely payment places the power agency at the
risk of being declared in default by bond creditors, according to Pecon.

$1 billion debt

The power agency's long-term debt, payable through the year
2034, has a principal amount of $432 million, according to the audit report. GPA
will have paid $490 million in interest payments after three decades, making its
total payments, including for principal, close to $1 billion.

Pecon said three GovGuam entities -- the Department of
Education, Department of Public Works and the Guam Memorial Hospital Authority
-- are current on their bills from Feb. 28 this year. What the three agencies
owe are older bills that they've made arrangements with GPA to make long-term,
installment payments according to Pecon.

According to the audit, the following agencies have worked out
the following payment schedules:

Department of Education: Beginning May 2002, 84 monthly
installments of $100,000 for its $12.9 million debt at an interest rate of
4.4 percent a year.

Department of Public Works: Beginning May 2002, 60 monthly
installments of $75,000 for a $9.4 million debt, with an interest rate of
4.3 percent a year.

Guam Memorial Hospital Authority: Beginning October 2001, 48
monthly installments of 45,695 for a $1.5 million debt, with an interest
rate of $4.4 percent a year.

Guam Waterworks Authority: $18.4 million of receivables from
the waterworks agency was converted into a long-term debt, payable with
money from an 11.5 percent surcharge on island customers' water bills.

Payments to GPA should be no less than $75,000 a month from the

Brooks said the water bill surcharge essentially means
Waterworks customers now are helping pay for power bills that GWA owes.

"We're all paying for it,'' according to the public

According to Brooks' office, the power agency posted a net loss
of $7.1 million in fiscal 2002. But the bulk of the loss stems from a one-time
inclusion on GPA's books of $6.8 million in net depreciation of some power-plant
assets that GPA will own at the end of 20-year leases by independent power

The power agency had an $8 million loss in fiscal 2001,
according to Brooks

August 8, 2003

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