First Time In 10 Years Marshalls Energy Company Turns A Profit

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MEC focused on ‘fundamentals of running a business’

By Giff Johnson

MAJURO, Marshall Islands (Marianas Business Journal, March 25, 2014 ) – For the first time in 10 years, the Marshalls Energy Co. has produced an operating profit. The company went from an operating loss of more than $450,000 in fiscal 2012 to generating an operational profit of $2.1 million in fiscal 2013, according to its draft audit report.

"There is no magic to this," said David Paul, general manager of MEC. "We just paid attention to the fundamentals of running a business."

In fiscal 2013, MEC increased its revenue nearly $3.5 million over fiscal 2012, in large part from the use of prepaid meters, which allow customers who have been disconnected for non-payment to get reconnected power while paying off their bills over time.

"Meters, the fuel consignment deal and aggressive collection" account for an amazing turnaround on "doubtful accounts," which went from $2.2 million negative in fiscal 2012 to nearly $1.5 million positive, Paul said.

The board, chaired by Public Works Minister Hiroshi Yamamura, has backed MEC management's implementation of a comprehensive recovery plan for the government utility, which oversees power services in Majuro, Ebeye, Wotje and Jaluit. "It's a homegrown plan," Paul said. MEC staff have "bought into our plan and everyone knows what is expected of them."

A report issued in mid-March by MEC states that work on six major projects during 2013 contributed to the company's recovery. In the past 10 years, it has had operational losses of about $20 million. The turnaround in debt collection combined with grants lowered MEC's "net deficiency" from 2012's $11.7 million to $4.2 million last year.

Among key developments in 2013:

- MEC obtained a $2.3 million grant from the U.S. Rural Utilities Service to refurbish Deutz engine number seven, one of two 6.1MW generators. All parts are now in Majuro, and work on the engine is starting. Last year, renovation work was completed on the other 6.1MW engine, dramatically improving fuel efficiency.

- Japan, through the Asian Development Bank, has provided $1.8 million to rebuild one of four fire-damaged engines in the old plant so that it can operate on a blend of diesel and coconut oil fuel. Work is about 60% complete.

- A grant from the Japanese Fund for Poverty Reduction of $314,000 purchased several hundred cash power meters, 224 of which were installed at the homes of disconnected customers who could not afford to pay off their debts in order to be reconnected. Another 126 meters were "installed in previously unconnected economically disadvantaged households in Majuro."

Paul said MEC has also been able to cut costs by $4 million over the past three years largely through improved engine efficiency.

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