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ASPA explains in writing to House how it drastically reduced its payables

The American Samoa Power Authority has provided a written explanation to a House committee as to how it drastically reduced its accounts payables, which peaked at about $14 million in July 2016.

While Samoa News and KHJ News have reported extensively on this issue in the past three weeks, the written explanation provides additional details.

Responding for ASPA executive director Utu Abe Malae, the ASPA managing director in a letter early this week to the House ASPA & Territorial Energy Committee, explained how ASPA reduced its accounts payables.

As of April 7, ASPA’s accounts payables stood at approximately $2.3 million or just 4.2% of fiscal year 2016 revenue said Utu and noted that this low level of short-term debt was not always the case.

For example, debt to vendors stood at just under $8.8 million as of September 30, 2015. At the same time, utility bills due from the American Samoa Government were almost $9.5 million.

Then on Jan. 15, 2016, ASPA and the ASG Treasury entered into a Memorandum of Agreement on financing of renewable energy projects. In the agreement, Treasury agreed to dedicate $8.1 million from proceeds of the American Samoa Economic Development Authority bond issuance towards the construction of renewable energy projects.

“Specifically, the money would go towards meeting the American Samoa Renewable Energy Committee’s strategic plan goal of electric generation for the Manu’s Islands from 100% renewable energy sources by October 2016,” Utu explained.

As a result, ASPA agreed to:

•     Reduce amounts owed to it for utility bills from the government by $8.1 million;

•     Waive approximately $1.3 million in late fees; and

•     Build a solar park on Manu’a islands of Ta’u and Ofu

While the agreement eliminated the government’s utility debt, it redirected monies that would have gone towards significantly reducing ASPA’s account payables to infrastructure projects with current costs totaling almost $13 million, according to Utu.

He also says that the additional $5 million paid by ASPA out of local funds for these projects contributed to the strain on its balance sheet. Utu informed lawmakers that ASPA’s accounts payables of almost $8.8 million at the end of fiscal year 2015 rose to a peak of just over $14.4 million at the end of July 2016.

Since that time, Utu says ASPA “has made a concerted effort to dramatically reduce debt to vendors” by:

•     Curtailing spending;

•     Reducing its grants reimbursement backlog;

•     Revising its procurement procedures and process;

•     Entering into payment plans with vendors who have balances over 90 days old;

•     Implementing improved cash management;

•     Repairing long inactive equipment in order to reduce equipment rental expenses;

•     Improving its accounting systems and controls;

•     Hiring on a “net-zero” basis;

•     Limiting overtime; and

•     Trimming staff counts through attrition and retirement from 460 as of July 31, 2016 to 421 as of April 7, 2017.

Utu points out that the reduction in operations of Samoa Tuna Processors Inc. (which closed cannery operations last December) has impacted ASPA and monthly billings have dropped from an average of $280,000 to $300,000 a month to $68,000 in February 2017.

ASPA began preparations for this eventuality in November 2016, one month prior to Samoa Tuna Processors commencement of reductions. The unanticipated reduction in operations placed a large additional strain on ASPA’s finances.

To address the issue, Utu says ASPA publicly announced various measures it would take including a possible reduction-in-force. He says ASPA continues to address challenges brought about by its cost structure, the American Samoa Government’s financial shortfall, and American Samoa’s uncertain economic environment.

“Notably, we have been able to confront our financial shortfalls without any rate increases other than what was previously approved through public consultation process,” he explained. “Also, while a reduction-in-force remains an option, it is an option of last resort.”

In closing Utu said, “ It is our mission to provide quality, safe, economical and sustainable utility services in partnership with our customers, the community of American Samoa and the Pacific region.”