The Marshalls Energy Company has been saved from bankruptcy since 2007 only by repeated injections of funds from the Marshall Islands government, which owns the power company. Now it may recover, said utility general manager David Paul Thursday.
This week, following recent approval of a $9.5 million loan from the Manila-based bank, the Marshalls Energy Company will swap a high-interest loan at the Bank of Guam for an eight-year payment holiday and a 1 percent interest rate with ADB, said Paul.
This infusion of low-interest capital culminates more than a year of negotiation with ADB and is coupled with an ADB grant of $1.7 million to convert one of the utility’s engines to use coconut oil biofuel to increase its energy self-reliance and funding for installation of hundreds of pre-paid electric meters to cut down massive customer debt that has exceeded $3 million.
The U.S. Rural Utility Service has also agreed to a four-year loan payment deferment, saving the company payments of $1.1 annually, Paul said.
It’s a huge relief, said Paul, who took over the struggling power company last September. “We were paying $160,000 a month (to Bank of Guam) prior to it being restructured earlier this year to $90,000 a month.”
Now, MEC will be down to a monthly payment of under $35,000 as a result of the ADB loan, saving $1.6 million annually that will be available for urgently needed engine repairs, maintenance and other needs.
Four of the company’s seven engines that provide power to the 30,000 people in the nation¹s capital of Majuro don’t work and the cash-strapped utility has been struggling to find money to repair the engines. The lack of power capacity has for nearly a year forced load shedding blackouts during peak daytime usage in Majuro.
Two of the dysfunctional seven engines at the power plant are expected to complete major overhauls in three weeks’ time and return to service, ending these frequent power outages, Paul said.
So overdue for major maintenance are two of the bigger engines that when the utility contracted with the Australian-based Deutz engine manufacturer for assistance in doing the overhaul, the firm’s representatives couldn’t believe the number of hours they’ve been run without heavy repairs. The two engines are behind schedule for refurbishing to such a degree that Paul said “we rewrote everything in the record books on engine use. Lack of cash delayed the overhauls until now.”
The plan to start using a coconut oil-diesel biofuel mix in one engine next year is also expected to cut costs and expand the market for locally produced coconut oil, stimulating an economy that has seen negative growth for the past two years and has an official unemployment rate of more than 30 percent.
The power company is still heavily in debt, Paul acknowledged. But the infusion of capital, engine repairs, the ADB’s high interest loan buyout and the U.S. loan payment holiday are improving the company’s cash flow, said Paul. “We’re seeing the light at the end of the tunnel,” he said.
