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Pacific Islands Development Program, East-West Center

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

$190 Million CNMI Power Purchase Deal Made ‘In Good Faith’
Local lawyer dismisses ‘irresponsible accusations’ of corruption

By Andrew O. De Guzman

SAIPAN, CNMI (Marianas Variety, Dec. 14, 2012) – The no-bid $190 million power purchase agreement between the Commonwealth of the Northern Marianas and a mainland-based company was "negotiated in good faith" and no evidence was offered to substantiate allegations of corruption tied with the diesel-based power plant deal, according to a Saipan Development LLC statement released by local attorney William M. Fitzgerald.

A defendant in the taxpayers’ lawsuit challenging the contract, Saipan Development, through Fitzgerald, submitted several motions in Superior Court yesterday, including a motion to vacate the preliminary injunction that stopped discussions of the power deal.

"The power purchase agreement was negotiated in good faith with persons who were believed to be capable of making the decision and had sufficient knowledge of law as it related to such authority to act (Gov. [Benigno R.] Fitial and then-Attorney General [Edward] Buckingham)," Saipan Development stated.

"There have been numerous irresponsible accusations of alleged bribery and payoffs of government officials. These statements are simply untrue and no proof has been presented," it added.

Saipan Development, according to the statement, was "created to build a new, modern, power plant on Saipan because it is needed to provide secure, reliable and sustainable power for the island of Saipan and its industrial park in Lower Bas[e]."

The Delaware-registered company said it "focused on the development of [Lower Base]; however, it became clear that replacement of the antiquated power plant had to be addressed first. It also became clear that a new power plant would benefit the people of Saipan in many ways."

Based on its calculations, Saipan Development said "the new power plant should save approximately $20 [million] per year which equates to $500 million over 25 years."

It added, "This savings is from fuel alone and is calculated in present dollars…. Obviously these modern, efficient automated engines should achieve long-term material reductions in operating costs including repairs, maintenance and labor."

The new 50-megawatt power plant will cost approximately $70 million when equipment is purchased and construction completed, and the plant financing to pay for the project was spread out over the entire 25 year lease agreement "[i]n an effort to achieve the lowest rates to customers."

"The new power plant is rated to be substantially more fuel efficient than the existing facility [which] uses about 40 percent more fuel," the statement added.

Commonwealth Utilities Corp. officials, however, do not believe that the contract is in the best interests of the CNMI.

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