A $14.5 million loan — $9.5 million of which will go to the government’s main power utility for a commercial bank debt swap to an ADB 1 percent interest rate and improvements in power supply — “will help put the economy back on track so the government can achieve economic stability,” said ADB Pacific Director Sungsup Ra.
The loan will give the Marshalls Energy Company financial breathing room, said general manager David Paul. “This means we will have money available to invest in the engines and recapitalize the company,” Paul said.
A year ago, MEC was $17 million in debt, was suffering an annual loss of more than $3 million, and its infrastructure was in disrepair, Paul said.
“We needed to recapitalize MEC,” he said. Approving the loan from ADB for a “swap” to remove the nearly $9 million higher-interest Bank of Guam loan “is keeping us alive and putting MEC on the way to recovery,” Paul said.
The ADB loan gives the Marshalls an eight-year holiday on repayment, then charges one percent interest over a 30-year payback period.
A separate grant of $1.7 million from Japan’s Fund for Poverty Reduction funneled through ADB was also approved Wednesday by Ra and Marshall Islands Finance Minister Jack Ading. It will pay for retrofitting one engine at the main power plant to use a coconut oil-diesel biofuel, increasing demand for copra produced by rural outer islanders and decreasing dependence on imported fuels. In addition, it will provide for installation of 350 pre-paid electric meters, allowing poor customers who were disconnected and unable to pay off their debt to get access to power again, said Ra.
If the government meets reform conditions by cutting spending and fixing poorly operating state-owned enterprises, it will be eligible in 2012 for a phase two ADB loan money of $5 million, Ading said.
Ra said this was the first ADB loan to the Marshall Islands in 10 years, a development that reflects improved relations with the Manila-based bank.
After years of troubled relations between ADB and the Marshall Islands in the 2000s when this Pacific nation was delinquent on its debt, since 2008 the government resumed timely loan payments, setting the stage for the loan.
“We support the home-grown initiatives of the government,” Ra said.
