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The Honolulu Advertiser
Posted on: Tuesday, March 19, 2002

Financing secured for Kaua'i utility deal

By Jan TenBruggencate
Advertiser Kaua'i Bureau

LIHU'E, Kaua'i — The cooperative that hopes to buy Kaua'i Electric has two different sources of financing to pay the $215 million price tag.

Kaua'i Island Utility Co-op yesterday filed its application with the state Public Utilities Commission for approval of the sale.

With either source of purchase financing, and at the existing electricity rate structure, the co-op would have considerable cash beyond expenses and would quickly begin building up equity, board members said.

The co-op said it has the possibility of full financing from the National Rural Utilities Cooperative Finance Corp., which is itself a co-op made of utility co-ops across the country.

With this source of financing, the co-op expects it could have more than 20 percent equity in Kaua'i Electric in 10 years.

The other possibility is the U.S. Department of Agriculture Rural Utilities Service, which would have a lower interest rate than the other source.

The Kaua'i co-op has an application pending before the Rural Utilities Service. Because of the lower interest cost, the co-op could have more than 30 percent equity in the company in 10 years.

"We believe this presents a solid financial plan for the co-op. The significant free cash flow allows us to do something substantial for the people of Kaua'i about our high electric costs as our future unfolds," said board member Fran Brennan.

Extra money would initially be used to pay down loans and build equity in the company.

At some point, some of that money would be returned to ratepayers, perhaps as annual checks written by the company.

Brennan said these "patronage refunds" would be issued "as early and in as large an amount as is prudent and financially sound."

The Kaua'i co-op said it also has arranged from the National Rural Utilities Cooperative Finance Corp. a $25 million line of credit for future purchases, and a $60 million line of credit for disaster relief, in case a hurricane or other natural disaster causes serious damage to the system.