Kaua'i utility proposal to go to PUC by Friday
By Jan TenBruggencate
Advertiser Kaua'i Bureau
LIHU'E, Kaua'i — The Kaua'i Island Utility Co-op plans to submit to the state Public Utilities Commission by Friday its proposal to buy Kaua'i Electric for $215 million.
The announcement last week of an agreement between the co-op and utility owner Citizens Communications came a week after the county released its own appraisal of the company.
The appraisal, by the consulting firm R.W. Beck, reached a value of $190 million for the island-wide electric company.
County officials say they are taking a wait-and-see attitude, and are not ready to reject the deal based only on its price.
"This gives us an opportunity not to talk about hypotheticals, but look at specific scenarios," said County Council Chairman Ron Kouchi. "With the PUC staff, the Department of Defense and the Consumer Advocate, there are several sets of experts who will be looking at this."
Gregg Gardiner, chairman of the co-op, said that there are many ways to appraise a company, and "we will deliver to the PUC a fairness opinion from an investment banker" that arrives at values higher than the sales price.
Even the county's appraisal produced numbers both above and below the proposed sale price.
R.W. Beck's appraisal produced these values: replacement cost less depreciation, $239 million; original cost minus depreciation, $159 million; the company's own net book value in 1990, $174 million; capitalized income value, $190 million.
"The income value ... falls clearly within the range of estimated fair market value," the consultant said.
Gardiner said alternative value calculations arrive at higher numbers.
But he said the impact on consumers ultimately will be a savings if the co-op is allowed to buy the utility at the proposed price.
A combination of a fair price and low interest rates mean no immediate rate hike would be needed, and the co-op should quickly be able to build up equity, and ultimately begin returning money to consumers, Gardiner said.
