Kauai Island Utility Cooperative’s financial picture is brighter than anticipated, said Alton Miyamoto, KIUC president and chief executive officer. Revenues and electric sales are both “much above what we envisioned,” Miyamoto told members of the elected KIUC board at its
Kauai Island Utility Cooperative’s financial picture is brighter than anticipated, said Alton Miyamoto, KIUC president and chief executive officer.
Revenues and electric sales are both “much above what we envisioned,” Miyamoto told members of the elected KIUC board at its last meeting.
Miyamoto said gross margins are 5.2 percent above budget, and sales are 5 percent better than last year, and nearly 4 percent better than budgeted.
Gross margins, or income minus fuel costs, are running 20 percent ahead of last year through the first four months this year, he said.
Electricity sales generally are an indicator of the island’s economic health, with sales reflecting strong hotel occupancies among other factors, he explained.
If margins continue throughout this year as they did the first four months of this year, Miyamoto anticipates greater equity, which may translate into greater member rebates, called patronage capital in the co-op world.
KIUC’s profitability and financial health are important as co-op leaders consider major acquisition projects, such as buying the Kauai Power Partners unit at KIUC’s Lihue Energy Service Center, and exploring the feasibility of buying the old Lihue Plantation power plant that can burn bagasse or diesel to generate electricity, he continued.
Bagasse is a biofuel byproduct of the harvesting of sugar cane. The Kauai Power Partners unit produces around one-third of the island’s power, and now KIUC purchases power from the plant’s owner.
A measure of financial stability and profitability, called TIER (times interest earned ratio), or long-term debt expense plus net margins divided by long-term debt interest expense, was 1.82 in April.
The higher the figure, the healthier the utility. The April figure was welcome news for the KIUC board, members said.
Should the TIER fall below 1.25, there is the potential that federal officials might force KIUC leaders to file for a rate increase with the state Public Utilities Commission, Miyamoto said.
Representatives of the U.S. Department of Agriculture’s Rural Utilities Service loaned the co-op money to buy Kauai Electric from its investor-owned parent company, Citizens Communications Company, in the fall of last year.
It would be representatives of the RUS who might require the rate-increase filing if income is not outpacing debt expense.
On a related matter, Miyamoto said it is projected that KIUC won’t need to add any additional energy-generation capacity until 2008 or later.
Co-op officials are in the process of updating KIUC’s integrated resource plan, he said. The plan is the long-range document stating how KIUC intends to continue to meet the island’s electricity needs.
