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Governor Ehsa signs unique contract with Chinese company |
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Written by Bill Jaynes
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Thursday, 21 January 2010 |
Governor Ehsa signs unique contract with Chinese company for operation of the Nan Pil Power Plant
Pohnpei, FSM - In the 30’s, the Japanese built the Nan Pil Hydro Electric Power Plant during the time of Japanese occupation of what was then called Ponape. Later the U.S. Army Corps of Engineers rehabilitated the plant and put it to use. A New Zealand company was hired by Pohnpei Utilities Corporation to study what it would cost to put the plant back on line. Now a Chinese corporation will take its turn to put the 80 year old plant through its paces.
 On Friday, January 8, Pohnpei’s Governor John Ehsa signed a unique contract with the Universal Power Alliance Company, Limited, a company from Beijing, China represented on that day by its General Manager, William Lin. UPAC has agreed to rehabilitate the generators at the Nan Pil Hydro Electric Plant and to operate the plant fifteen years. UPAC’s initial investment will be repaid over the course of the contract. In the mean time UPAC will sell the power they produce to Pohnpei Utilities Corporation.
A representative of the Pohnpei State Attorney General’s office intimately familiar with the details of the contract said that for the first five years UPAC will sell the power they produce at the set price of 26 cents per kilowatt hour. During years 6-15 they will sell generated power to PUC at the set price of 22 cents per kilowatt hour. PUC currently charges its customers 34 cents per kilowatt hour a price that fluctuates based on the price of diesel.
Mr. Lin said that the plant should begin producing power by this time next year.
Governor Ehsa said during the 11:00 a.m. signing ceremony that the
contract was unique because Pohnpei law was not set up to handle what
he called “the generous offer” of the Universal Power Alliance. He
said that the way Pohnpei does business needed to change and that took
time. It took 18 months between UPAC’s initial offer and the signing
ceremony. During that time, Mr. Lin made 16 trips to Pohnpei. UPAC
was the only company to respond to a request for proposal issued by PUC.
“Better late than never,” Governor Ehsa said. As far as he knew the
contract that he signed was the first of its kind in the FSM.
“100 per cent of the risk is on the company. There is none on Pohnpei
State,” he said. “If no power is produced the company receives no
revenue.”
There is the matter of Pohnpei State’s reimbursement of UPAC’s
investment over the course of 15 years. Governor Ehsa said that the
plan was an unprecedented unsecured financial commitment by UPAC.
UPAC has wide expertise in the area of hydro-electric power
generation. They participated in the construction of the world’s
largest hydro-electric power plant at the Three Gorges in China. Lin
said that if the plant at Nan Pil goes well his company also has the
capacity to consider the possibility of building other hydro-electric
plants and listed the Lehn Mehsi River in Kitti as one example. He
said that his company is sending experts to study the feasibility of
such a plant within the next few months.
The Universal Power Alliance will be dismantling the generators at the
Nan Pil Hydro Electric plant and shipping them to China for complete
rebuilding. They say that process will take approximately three
months. When it is complete, a PUC representative and a representative
of Pohnpei State will go to the UPAC plant for a thorough check out of
the rebuilt generators. When Pohnpei officials have signed off on the
rebuild, the generators will be readied for shipping back to Pohnpei to
be put to use not by PUC but by the Universal Power Alliance Company.
UPAC will operate the plant and sell the power they produce to the
utility.
Lin said that the plant should be operational by this time next year at
the latest but that its generation capacity will be limited for the
first year. He said that currently 60% of the water flow of the Nan
Pil River that might otherwise be used for generation of power is being
used by PUC for treatment purposes for delivery to its water
customers. He said that another source for water treatment has been
found that will allow UPAC to use the full capacity of the Nan Pil
River exclusively for power generation by their second year of
operation.
The Governor’s conference room was crowded with dignitaries invited by
the Governor’s office to witness the signing of the unique contract.
Notable by his absence was Feliciano Perman, the General Manager of
Pohnpei Utilities Corporation who said that he did not receive an
invitation to the event. With the exception of Hainrick Stevenson who
works as the Governor’s Public Affairs Officer, none of the PUC board
members were present at the event either. None of the Pohnpei
Congressional representatives were at the ceremony. Senator Stevick
Edwin, Pohnpei State Legislature’s Chairman of the standing committee
on Public Works, Transportation and Communication was also not there.
Stevenson acted as the Master of Ceremonies at the event and knew that
the state radio station, V6AH, recorded the proceedings for its radio
broadcast. With the exception of Senator Dion Neth he publicly thanked
all of the people who had been invited as if they were actually in the
room during the ceremony.
Recently appointed Commissioner of the Pohnpei State radio station,
Shelten Neth confirmed that the proceedings were aired in their
entirety on that Friday afternoon.
Willy Kostka, Chairman of the PUC board said that the board had seen
three draft copies of the proposed contract between Pohnpei State and
UPAC. He said that the board sent the first contract back to Pohnpei
State and asked for changes to be made. The State made changes but
Kostka said that the changes were minor and didn’t address the board’s
principal concerns. They rejected the second draft and the third
draft. The board has not seen another, he said.
Kostka said that PUC hired a company from New Zealand to do an analysis
of what it would take to rehabilitate the Nan Pil plant and sent out
several Requests for Proposals (RFP) on the basis of $1.5 million. He
said that the draft contracts that the board reviewed involving UPAC
were in excess of $2 million.
The PUC board is not sure which version of the contract was signed by
Governor Ehsa and William Lin but both Kostka and Perman said that they
are pretty sure they have not seen a copy of it. It’s why the PUC
board members, other than Stevenson, didn’t attend the event.
Kostka said that the board took the recommendation of PUC Management
and its legal counsel to reject the contracts in all three of its draft
forms because they felt that it was “too much risk for PUC to assume,”
and that it was “not in the best interest of PUC or of its customers.”
When asked for specific reasons for the PUC Board’s rejection of the
contracts, Kostka said that he didn’t have the contracts in front of
him but one term of the contracts that stuck out in his mind was that
PUC was to have paid all of the taxes that UPAC would have owed due to
sale of power to PUC. He reiterated that the board members, to the
best of his knowledge have not seen the new contract that Governor Ehsa
said would put Pohnpei at no financial risk.
Perman said that the Governor’s office submitted a resolution to the
Legislature, one that the Legislature passed, that provided for the
Governor to act as an agent on behalf of PUC on the basis of PUC’s own
declaration that it was in a state of emergency.
PUC is a public corporation. The Governor has the power and
responsibility to appoint members of the Board of Directors subject to
Legislative confirmation.
UPAC’s William Lin gave the impression during the signing ceremony that
as soon as the signing was complete his company would move in to
dismantle the generators for shipment to China.
Perman said that has not happened and that he was told that a
Legislative Committee would be looking into the contract. He said that
he didn’t know of any laws that had changed regarding the way that
Pohnpei State does business. “I think the law is still the same,” he
said. “There is a big question whether the laws need to be amended.”
Approximately two years ago, before Perman was appointed as PUC’s
General Manager, a company that Perman called “Parsons” installed new
computerized control units for the plant on a higher floor of the plant
from the previous unit. What Perman called, unprecedented flooding had
damaged the previous panels beyond repair. The panels had previously
been located on the first floor. Parsons was paid approximately $1
million for their work.
The plant worked for a few months after Parsons did their work and then
shut down due to generator vibrations. At the time, PUC employees at
the Nan Pil plant claimed that Parsons had not finished the job and
they thought that Parsons should come back to Pohnpei to finish the
job.
Perman said that when he came on as General Manager his biggest concern
was to get the plant back to a functional level rather than worrying
about whether or not “Parsons” had done a job they were hired to do
before he arrived in the position. No legal actions were initiated
against the company but the plant has not been functional for well over
a year.
Kostka said that the board told the Governor that it was in a state of
emergency due to the health of its diesel powered generators. “If we
lose one we will be in trouble.” He said that JEMCO, the committee
that oversees the Compact of Free Association between the United States
and the Federated States of Micronesia had already expressed interest
in buying a new diesel powered generator for PUC. “Why should we turn
down free money for a long term contract that’s going to cost us
money,” he asked?
But, he says, PUC board members have not, to the best of his knowledge,
seen the final contract. “If that’s changed, well, then, I don’t know,”
he said.
He said that PUC has always viewed the Nan Pil plant as a resource that
can only sometimes be relied upon to generate power. If it doesn’t
rain it can’t generate power. There is no reservoir in Pohnpei.
Governor Ehsa said during his remarks that UPAC had agreed to pay the
Kingdom of Nett for the use of its natural resources. Mr. Lin
confirmed the Governor’s assertion saying that the payment would be
from its share of revenues from power generation sales at the plant.
Nett Iso Nahnken Salvador Iriarte gave the final remarks at the
ceremony. He gave his personal guarantee that residents of Nett would
not bother UPAC workers at the Nan Pil plant.
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Last Updated ( Thursday, 18 March 2010 )
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