Officials of Kaua’i Island Utility Cooperative closed the deal to purchase the Kauai Power Partners power plant at KIUC’s Lihu’e Energy Service Thursday, at a revised price of $41.75 million.
The sale was endorsed by the state consumer advocate and approved by the state Public Utilities Commission late last month.
Originally, the purchase price was $40.2 million, but added have been costs to settle certain KPP invoices ($423,000), some $474,000 to retire the capital lease on a reverse-osmosis feed water treatment system, and $650,000 in transaction costs.
Not included in the $41.75 million price tag are the costs of the fuel and spare-parts inventories.
KIUC officials intend to get low-interest loans from public or private sources for $41.2 million of the purchase price, and pay upwards of $550,000 in cash to Pur Energy, a subsidiary of Dominion Resources of Virginia, the plant’s previous owner.
The 26.4-megawatt facility, located off Ma’alo Road in Kapaia near the road to Wailua Falls, generates around 40 percent of the island’s electricity.
The newest of KIUC’s generating plants, it has the highest efficiency, and burns naphtha. The others burn diesel fuel.
“The acquisition produces tangible financial benefits to its customers and/or members when one takes into account KIUC’s lower weighted average cost of capital,” the consumer advocate said in endorsing the purchase.
Members of the PUC found “the acquisition is financially beneficial to KIUC’s customers and/or members.”
“This purchase is a remarkable achievement for our members,” said Gregg Gardiner, chairman of the KIUC board of directors.
“It will save members approximately $40 million over the next 25 years. With the purchase of the KPP plant, KIUC will achieve a higher equity in a shorter time, increasing the margins on which our patronage capital refunds to members are calculated,” said Gardiner.
“The concept behind this purchase is sometimes it is cheaper to buy than rent,” said Alton Miyamoto, KIUC president and chief executive officer.
“By concluding the deal at the right price and financing terms, KIUC’s expenses will be reduced every year the plant is in operation,” said Miyamoto.
“We are pleased the PUC and the consumer advocate agreed we made the best decision for our members, and we look forward to returning part of the anticipated savings to our membership,” Miyamoto said.
The plant cost $54.4 million to build, according to Dominion sources, and has a life expectancy of 35 years.
Associate Editor Paul C. Curtis can be reached at pcurtis@pulitzer.net or 245-3681 (ext. 224).
