The Guam Power Authority has received approval from the Public Utilities Commission and the Consolidated Commission on Utilities for a $37 million revolving line of credit from Bank of Guam, bringing its approved fuel financing options to a total of $70 million.
The financing is intended to help GPA manage the high upfront costs of fuel purchases while recovering those costs over time through the Levelized Energy Adjustment Clause on customers' monthly power bills, according to a GPA news release issued Friday.
“Global fuel prices surged earlier this year following disruptions to oil supplies and shipping through the Strait of Hormuz amid the Iran conflict. GPA's average fuel cost rose from approximately $88 per barrel in January to more than $222 per barrel in April, substantially increasing the cost of fuel shipments. Prices remain elevated and continue to fluctuate,” GPA said.
Bank of Guam was one of three financial institutions selected through a competitive solicitation conducted by the Guam Economic Development Authority on GPA's behalf to help finance the upfront costs.
“The Bank of Guam line of credit would help bridge that gap, providing funds to meet fuel payments as they come due while GPA recovers those costs over time,” the release stated.
GPA said the PUC described the Bank of Guam credit line as “prudent and necessary.”
“Our priority is maintaining a steady supply of fuel to keep power generation reliable for our customers,” GPA General Manager John Benavente said. “The challenge is that we have to pay for fuel shipments long before we've collected the full cost through customer bills. These financing options give GPA the flexibility to meet those payments when they're due, while managing the financial impact of those upfront costs.”
Subject to final negotiations and completion of required approvals, the Bank of Guam revolving line of credit would be for three years, with up to two optional one-year extensions.
The proposed terms cap the interest rate at the applicable prime rate plus 2% and the commitment fee at 1% of the committed amount, GPA said.
The PUC previously approved a $22.5 million floating-rate term loan from Bank of America and a $10 million revolving line of credit from Coast360 Federal Credit Union.
GPA emphasized that the financing does not eliminate fuel costs or replace or change the current LEAC rate. Instead, it is intended to help the utility manage fuel payments and maintain a reliable supply for power generation.