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Pacific Islands Development Program, East-West Center

With Support From Center for Pacific Islands Studies, University of Hawai‘i


Controversial Company Advisor Visiting CNMI
Same business involved in $190 million power purchase deal

By Haidee V. Eugenio

SAIPAN, CNMI (Saipan Tribune, Dec. 5, 2012) – Saipan Development LLC adviser Kenneth Mahmood said yesterday that the planned multimillion shipyard facility and new 50-megawatt power plant in Lower Base is the best deal possible for the Commonwealth of the Northern Mariana Islands, and hopes that the people of the islands can get behind these projects to spur economic growth.

He also said that impeaching Gov. Benigno R. Fitial, who has less than two years left on his term, and local politics are not helping lure more investors into the CNMI.

Delaware-based Saipan Development LLC (SDLLC) bagged a sole-source, $190.8-million diesel power purchase deal that the governor and former attorney general Edward Buckingham signed off on.

SDLLC is co-founded by David Mahmood of Allegiance Capital Corp. and Don Kurz of Keystone Shipping. David and Kenneth Mahmood are brothers.

SDLLC plans to set up a shipyard facility in Lower Base that will encompass the current location of the Commonwealth Utilities Corp. (CUC). Part of the shipyard project is the development of a 50-megawatt power plant that Kenneth Mahmood said would provide at least 10 percent engine efficiency and cheaper power.

Kenneth Mahmood is currently on Saipan. Jason Osborne, consultant for Allegiance Capital, has also been on the island.

Osborne, a former lobbyist, said his main task is to push for legislation to allow U.S. military vessels to be repaired in the CNMI. He has helped in the Republicans' political campaigns, including the recent Romney/Ryan presidential campaigns. In 2009, he was also campaign manager for Fitial's re-election. He said he made a commitment to Delegate Gregorio Kilili Sablan (Ind-MP) and Fitial that he will help push for this legislation.

Mahmood and Osborne provided more information about the shipyard and power plant projects in separate media interviews yesterday, as well as in meetings with lawmakers, businesses, and other individuals the past few days.

In the morning, Mahmood and Osborne were interviewed on KKMP Radio. They also had an interview in the KSPN 2 studio in Susupe yesterday afternoon, and that's where Saipan Tribune caught up with them.

They took issue with the statements made by numerous individuals to the CNMI media, as well as the media's own presentation of the facts, about the power purchase agreement.

Mahmood said it's not true that the power plant is bad for Saipan. The power plant itself is $70 million but because of financing, the cost becomes $190.8 million in 25 years, but Mahmood said it may not reach that amount.

"There's nothing in the injunction that's true," he said.

The sole-source PPA is among the issues in a defeated resolution impeaching the governor for 16 allegations of corruption, neglect of duty, and felony. The incoming supermajority is reintroducing the impeachment resolution as early as January 2013.

Mahmood said he hopes the court injunction on the power plant project is lifted, so that parties could start working together and address issues to make the project work. He said he is not part of SDLLC so he doesn't think he's part of the injunction.

But within an hour after the KSPN 2 interview, Mahmood and Osborne were subpoenaed by the court to testify at separate depositions on Dec. 17 and 18.

Osborne said they are here "to get a lay of the land," to learn about peoples' concerns about the project, and discuss the project with them.

"The bottom line is the power plant project is secondary to what we want to accomplish. And we want to be good neighbors. We want to employ CNMI residents to work on the shipyard, so were not here to make money off the power plant, we're here to make money collectively, not off the backs of the people." he said.

They also clarified that CUC won't be obligated to pay for 50 megawatts of power when it only needs less than 30MW, for example. However, the plant will have a capacity to produce 50MW.

"They're paying for the 50MW plant, they're not paying 50MW of power," they said. "There's a distinction."

Mahmood said their goal also is to get the hotels online, and give them a much better deal than what they currently have.

Sen. Juan Ayuyu (Ind-Rota), chairman of the Senate Public Utilities, Transportation and Communications, said he would like to meet again with SDLLC officials to have the panel's concerns addressed. He and Sen. Ralph Torres (R-Saipan) separately said if it were for them, they would like to have the next meeting with senators at the Legislature so that the public would also be able to watch and listen to the discussions.

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