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KUTh Energy provides update on Saipan project on the Northern Marianas

Saipan, Northern Marianas, west Pacific Ocean (source: flickr/ Matt Watts, creative commons)
Alexander Richter 29 Aug 2012

Australian KUTh Energy answers media reports on the uncertainty surrounding the Saipan project in the Northern Marianas. In January 2012 the company had won a tender for the drilling of a geothermal gradient well and a concession to develop a geothermal power project.

Following news of some political issues surrounding the geothermal project in Saipan on the Northern Marianas, Australian KUTh Energy released an update on the project.

In the update the company refers to previous releases on KUTh Energy having been the “successful tenderer for the drilling of a geothermal gradient well in Saipan and a concession to develop geothermla power on the island in the event of an adequate geothermal resource was located”.

Back in late January 2012, the Commonwealth Utilities Corp. (CUC) in Saipan confirmed its formal intent confirming “at this time the contract is being prepared for the necessary government review and endorsement. You will be notified when the contract is ready for your review and endorsement.”

Now KUTh Energy advises that ”

despite ongoing efforts to close this contract, including drafting and negotiating documentation, we have encountered considerable difficulties with local issues leaving us uncertain how this project will progress.

Since KUTh was announced as the successful tenderer for the geothermal drilling and power development concession on Saipan in an international and independently monitored process, the Governor declared a state of emergency over the CUC, effectively placing it under his control. The Governor and the then Attorney General have apparently subsequently signed off on a 25-year sole source power purchase agreement with a private company to construct additional diesel generation in Saipan. The effect of the diesel agreement will likely be to limit the governments’ ability to contract with renewable energy producers as promised.

Local action has been taken to try and stop the diesel agreement including personally filed litigation, and a resolution by the Senate of the Northern Marianas Commonwealth Legislator to cancel the diesel agreement. In the resolution the Senate said that the diesel PPA “has placed CUC in anticipatory breach of its agreements to award contracts to those renewable energy proposers, including KUTh Energy … who followed the procurement rules and submitted winning proposals intended to benefit the CNMI and lower the cost of electricity.”

KUTh Energy says it has “and will continue to pursue the government in an attempt to clarify and resolve this issue. In light of the public debate that is taking place through the media in Saipan we believe it is appropriate to update investors with this information. It is evident from that debate that there is strong support for replacing high cost diesel generation with renewable energy sources including geothermal as Saipan has been afflicted with an expensive and unreliable electricity supply for some years. We will further advise as information becomes clearer to the company.”

Source: Company release by e-mail