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The Administration supports extension of the guarantee and loan.
However, as noted below, we favor modifying certain aspects of this
section.
In particular, we object to the provisions whereby the Guam Power
Authority must pay principal and interest to. the Government of
Guam, but the Government of Guain is forgiven the payment of interest. to the Federal Government. Such a plan would constitute a
windfall to the Government of Guam financed bythe customers of the
Guam Power Authority and the Federal Government. The 1976 loan
to the Guam Power Authority was a business loan to a failing public
utility. The Secretary of the Interior guaranteed the loan on the authority given him by the United States Congress and is liable to the
Federal Financing Bank for the unpaid principal and interest. Nonpaymentof interest beyond December31, 1980, as proposed by section
303, would leave the Secretary of the Interior with a Hability for
which no funds are appropriated. While we support an extension, we
object strenuously to the nonpayment of interest provision of section
q
or less the Authority will be able to obtain private financing and end
its dependence on the Federal guarantee and loan. We understand
that, for this reason, the Guam Power Authority would prefer a 10year extension contained in section 303, which provides for the amortization of a principal.
There is ample incentive for the Guam Power Authority to return
to the private market as soon as possible. The private tax free bond
rates should be substantially less than comparable Federal rates. Additionally, Guam Power Authority is very much interested in reestablishing its credit rating in order to reenter the private bond market
for expansion financing. The Administration endorses the idea of a
10-year extension and proposes that the following language be substi-
tuted for the current language of section 303:
Sec. 303. Section 11 of the Organic Act of Guam (64 Stat. 387;
48 U.S.C. 14232), as amended, is hereby amended by deleting all
after the words “December 31, 1980.”, and substituting the fol-
lowing language:
The Secretary, upon determining that the Guam Power
Authority is unable to refinance on reasonable terms the obligations purchased by the Federal Financing Bank underthe
fifth sentence of this section by December31, 1980, may, with
the concurrence of the Secretary of the Treasury, guarantee
for purchaseby the Federal Financing Bank, and such bank
is authorized to purchase, obligations of the Guam Power
Authority issued to refinance the principal amount of the
obligations guaranteed under the fifth sentence of this section.
The obligations that refinanee such principal amount shall
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mature not later than December 31, 1990, and shall bear interest at a rate determinedin accordance withsection 6 of the
Federal Financing Bank Act (12 U.S.C. 2285). Should the
any
.
We have been informed by officials of the Guam Power Authority
.that, with the approval by the Public Utility Commission of two rate
increases, the Guam Power Authority will be able to achieve a 2.0
ratio of income to debt service requirements that would makeits longterm obligations attractive to the private bond market. Assuming that
such a ratio could be maintained, it is anticipated that within 10 years
ef
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3803.