SAIPAN — FEMA has denied the Commonwealth Utilities Corporation’s request for an advance payment on its Sinlaku restoration costs, making legislative approval of a proposed $40 million line of credit more urgent, CUC Executive Director Kevin Watson said Friday.
Watson, at a recovery briefing at CUC headquarters in the Joeten Dandan building, said CUC had submitted a best estimate of about $70 million in restoration costs at FEMA’s request and had been hopeful of receiving an advance of roughly half that amount. He said FEMA representatives had been optimistic the advance would be approved, but that CUC recently learned it had been denied because the funds were not available in FEMA’s budget.
Watson stressed that the denial applied to the advance payment, not to the underlying reimbursement, which remains in process. He said a FEMA team of specialists was at CUC headquarters training staff to complete reimbursement paperwork correctly, noting that a single error could derail an application.
With the advance denied, Watson said CUC is seeking a $40 million line of credit, with local banks having agreed to help finance it. He said the arrangement requires approval by the House and Senate, which he acknowledged could be a lengthy process. He said a line of credit, unlike a loan, would let CUC draw only what it needs at a given time to keep interest costs down.
Watson said CUC is currently operating on its reserves, which stood at about $13 million before the typhoon. He said the utility had been concerned even before the storm that rising fuel prices could drain those reserves, and that the storm complicated its finances further: CUC burned less diesel with the power system down but also sold no power, even as restoration added major new costs.
Watson said the cash situation could challenge the pace of restoration, and that much would depend on securing the line of credit. He said CUC did not want to ask vendors to delay payment given that they are aware of the utility’s cash position and may be hesitant to do so.
On Tinian, Watson said the military is currently covering the cost of fuel and power for the generators it provided, a benefit to residents that he expected to continue until around July 10, after which CUC would resume a 75-25 cost split. During that period, he said, Tinian customers would be billed only the roughly $7 customer service charge rather than for power usage.
