CNMI Utility Board Members Says CUC 'Moving Too Fast' To Acquire Diesel Generating Plant

Board must do due diligence into year-old company before purchase

By Junhan B. Todiño

SAIPAN, CNMI (Marianas Variety, March 29, 2017) – Commonwealth Utilities Corp. board member Dave Sablan Jr. believes that CUC is “moving too fast” in acquiring a diesel generating plant system from General Pacific Services Marianas Inc. or GPSM.

He said the board should look into the background of the company, adding that GPSM has only been in business since last year.

“I was actually very surprised to learn that the owner of this company is Amellia R. Toelkes. I believe she is the wife of Robert Toelkes who previously offered to finance and probably sell a reserve osmosis system to CUC,” Sablan added.

He is “wondering if [Mr.] Toelkes might be behind the scenes in financing the generator that CUC is considering for purchase.”

Sablan said the proposed acquisition of the 8-to-10-megawatt diesel generation system could cost CUC $20 million.

Why would CUC seek to acquire the generator without guidance from a consultant? he asked.

Sablan said they should not be dealing with a middleman because CUC could deal directly with a generator manufacturer to get a better deal for ratepayers.

In a letter to CUC board chairwoman Adelina Roberto on Tuesday, Sablan asked the following questions:

“1) Was there a meeting with GPSM on March 22? Was it a board meeting? I am asking as the board met with GPSM on Monday, March 13. As you know, I protested against this meeting and did not attend. Taking over a management responsibility compromises the board members and removes our management from being held accountable should anything go wrong with this award through its completion.

“However, I am assuming this March 22 meeting was with management, since there was no notice of a board meeting.

“2) Why are we financing this generator when I understand we have the funds to purchase it directly from the manufacturer without the need for the involvement of a middleman, which is how I view GPSM’s role in this procurement.

“3) Is the consultant who is supposed to help us design our generator-acquisition plan over the next 5-7 years on board with a contract with CUC to help us evaluate this procurement? We gave our approval for management to move forward with an award for the consultancy contract.  

“I have not heard if the procurement department selected the consultant yet; the board would have to approve the contract, and that has not come before the board yet. So, I am assuming the consultant is not on board yet. If that is the case, this generator acquisition is premature.

“4) I would like to see the financing plan being proposed…. Please send it to me as soon as possible. I am thinking the whole financing plan will probably be at a high interest rate, and will cost CUC probably double or triple the cost of the actual generator and the construction cost, combined.

“5) As I am sure you are aware, Robert Toelkes (husband of Ms. Amellia Toelkes, president of GPSM) was president of International Bridge Corporation IBC which declared bankruptcy recently.

“IBC was awarded the bid to construct John F. Kennedy High School here in Guam. When they received the award, they offered a financing package after the fact. In the end, JFK high school over 30 years will cost the government of Guam about $157 million, for a student population of about 2,000. If Mr. Robert Toelkes is involved and offering this financing package out of Florida, I believe the total cost of this generator acquisition will be way too much and would not be good for our customers.

“We have a fiduciary responsibility to get the ‘best for the least cost.’   I do not see the financing of this generator — nor the purchase of this generator through GPSM — to be the best option for CUC and our customers.

“We should accept the recommendation of the Engine Selection Committee to go with the second bidder which is a very reputable company, which manufactures generators.

“6) I am sure you are aware also that Robert Toelkes tried to sell us a finance package a couple of years ago. He was going to assess our generators to determine what repairs, refurbishments, or replacements would be needed. He would present that to us, and then offer to finance the whole cost. We rejected that unsolicited offer as we had other priorities to address at the time.”

In a letter dated March 16 to Amellia R. Toelkes, CUC acting Executive Director Gary Camacho said they intend to procure a diesel generating plant system pursuant to the quotation provided to CUC under RFQ-PG-17-001 by the GPSM team.

Camacho said CUC met with GPSM’s team over several days to discuss contract terms and financing.

“These discussions included presentations and discussions with CUC’s board of directors,” he said.

Camacho said the board of directors has decided that CUC will continue with its plans to proceed with the procurement of the engine which will include turnkey supply, installation and commissioning of 1x8-10 megawatts of diesel generating plant system using the engine referenced in the GPSM quotation which is being purchased through Fairbanks Morse.

He said the procurement of the engine will be under a financing program through a 30-year bond issuance which includes a three-year capital reserve feature.

He said a preliminary discussion of the bond issuance occurred with the board of directors on March 13 and March 15, 2017.

Camcho told Toelkes that CUC will be working closely with her and her team during the procurement process.

“As you are aware, it is critical to CUC that this engine system be put into operation as soon as is practical considering the need to first structure an acceptable bond issuance program,” he told Toelkes.

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