January 20, 2010

By Bill Jaynes
The Kaselehlie Press

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 fi fteen 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 offi ce intimately familiar with the details of the contract said that for the fi rst fi ve 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 fl uctuates 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 fi rst 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 fi rst 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.