New deal cuts price for Kaua'i Electric
By Jan TenBruggencate
Advertiser Kaua'i Bureau
LIHU'E, Kaua'i — Citizens Communications has agreed to sell Kaua'i Electric to the Kaua'i Island Utility Cooperative for $215 million.
The price is $55 million less than an earlier sale agreement between the two that was rejected by the state Public Utilities Commission. But it is $25 million more than an appraisal by Kaua'i County concluded the utility is worth.
The agreement still requires the utilities commission's approval, which Kaua'i Electric said was expected within 12 months.
Neither side would discuss details, pending filing of an application for the ownership change with the commission, but Kaua'i Island Utility Cooperative Chairman Gregg Gardiner said it provides for a solid economic picture for the new owners.
"At the $215 million price, the financial picture for the cooperative is very encouraging in terms of rock-solid financial stability and using the buildup of equity over time to directly benefit (the cooperative's) member-owners," he said.
Under the co-op ownership scheme, all of the island's 31,000 electric utility customers would become the owners of the company, each with a single vote at its annual meetings.
The county and the state's consumer advocate opposed the earlier agreement at a $270 million price, in part because the price was so high that it threatened rate hikes in case of any emergency. Kaua'i's electricity consumers already pay among the highest rates in the nation.
Kaua'i County, which has also expressed interest in taking over the utility, and a county task force concluded that either a co-op type of ownership or county ownership would be preferable to control of the utility by a for-profit firm.
The county last week released its appraisal of Kaua'i Electric, which arrived at a $190 million price. Mayor's administrative assistant Wallace Rezentes Sr. said he was not prepared to say the co-op's sales price was out of line.
"We really don't have a comment on their $215 million price at this time, because sometimes the devil's in the details. We need to look at the whole package," he said.
Gardiner said full disclosure of the sales agreement would be made only after it has been submitted to the utilities commission.
In the meantime, Gardiner said the co-op board is committed to retaining Kaua'i Electric's existing management team and staff.
He said they hope to pay for the purchase through a loan from the U.S. Department of Agriculture's Rural Utilities Service. If that is not available, there is also a loan commitment from the National Rural Utilities Cooperative Finance Corp., which provides financing to utility co-ops across the country.
