Annual Report FY2016 - Kosrae Utilities Authority
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Information
November 11, 2016
Dear Governor Jackson,
I am honored to submit to you on behalf of the KUA Board of Directors and staff the KUA Annual Reports for Fiscal Year 2016 as mandated by Section 7.1212 (2) of the Kosrae State Law 5-38. The submission includes an Operation Summary Reports with unaudited Financial Statement Summary Reports for the fiscal year ending September 30, 2016.
KUA is fortunate to realize significant progress in improving and stabilizing financial health of the operation as being the first year since the establishment of the organization. The remaining challenges are the improvements of depreciated fixed assets and operating capability to invest in essential alternative energy projects. This continue to drive our efforts to work with outside donors and FSM National Gov't and Kosrae State Government for support and assistance for these needed improvements and enhancement of renewable energy projects. The staff and the Board have been aggressively working with JICA and World Bank during the fiscal year for the implementation of the approved energy improvement projects. Due to strict requirements to comply with the subject grant assistance, the actual implementation will commence during the next fiscal year. These projects will significantly contribute to improve system efficiency to reduce cost to the operation as directed under the Strategic Development Plan of Kosrae State as well as the National Energy Policy and Plan. The Board and the staff also continue our dialogue with the Indian Energy Pacifica, Ltd for the proposed Micro-Grid System with additional renewable energies and the EDF-ll funding from EU for the Grid-stability study and other project improvement needs. Another funding source that were prepared and submitted as Concept Note is the Green Climate Fund to support and improve the distribution line infrastructure facility and funding the proposed design for the Micro-Grid System.
The fiscal operation of the Kosrae Utilities Authority is summarized in the attached unaudited Financial Statements Reports for Fiscal Year 2016. These unaudited figures represented the results of operation during the past fiscal year. The operating revenues for FY2016 were $2,473,208 with other non-operating income of $17,163.00 resulted in total revenues of $2,490,371and total operating expenses of $2,290,716 resulting in net income of $199,655. The bulk of the operating revenues, approximately 51% were spent on fuel and the remaining were Personnel Cost, Operational and Administrative expenses, Maintenances, and Depreciation expenses . The financial situation has been significantly improved which covered the operating expenditures but remain short to finance major capital improvement projects which still depend on outside funding assistance. The management has been prudent in controlling expenditures which reflects in the attached statements in order to achieve a balance budget or a positive statement in addition to our efforts in pursuing efficiency improvements activities and alternative renewable energy sources to reduce fuel cost and improve services to customers.
The number of active customers served during FY2016 were slightly increased by approximately 1.3% from 1,762 from previous fiscal year to 1,785 numbers of customers. The customers based is comprised of approximately 80% residential with total energy sales of 37%, 12% commercial customers with kwh sales of 30%, 4% Kosrae State Government with sales representing 19%, 3% non-state government accounts with kwh sales of 8% and 1% industrial with 6% kwh sales. The commercial sales had a significant increase due to the operation of the Luen Thai Fishing Co. and other commercial activities in the state. The total energy sales to all customer sectors were 5,320,992 approximately 16.7% increase in total energy sales from the previous year. The Cash Power Meter customers consisting of 83.7% contributed to the steady revenues to support the basic needs of the operation.
KUA has been working with suppliers to purchase new heavy equipments such as Bucket Trucks, Auger Trucks, Backhoe and supporting equipments to perform major energy projects, since the existing units are critically in bad shape and won't be able to support the JICA projects, power line extension projects and major service request by customers. The management requested the World Bank to consider financing one Bucket Truck and other needed equipments under the grants and others to be purchased by KUA.
The improvement of the Lelu Power Distribution Line will be funded by JICA grants which is contracted to NBK to do the upgrading works and new extensions lines for Melo/Okat and Malem Inner Road are funded by KSG and are among line works to be implemented during the new fiscal year. The Utwe Restoration Line works remain as one of the upgrading line works that need to be done and will depend on available funding and is one of the major works to be scheduled and implemented during next fiscal year.
KUA has continued to prioritize job-related trainings to KUA employees to improve performances and work methods in their daily tasks and work responsibilities. KUA has participated in several trainings during FY2016 and these trainings were Power System Efficiency, Hybrid Power Generation System, Water Resource Management, Solar PV Maintenance and Operation, APIPA and Pacific Power Association Trainings. KUA has continued to coordinate with PPA, JICA and other agencies for appropriate trainings that advance them with the new and fast-changing technologies in the electrical development field especially in renewable energies to make sure that the KUA work force possesses the necessary skills and knowledge to perform tasks and responsibilities to sustain the operation and such services demanded from the stakeholders.
Major Capital Projects that were undertaken during FY2016 with support from the Kosrae State Gov't, FSM National Gov't and Donor Countries are as follows:
1. KUA has achieved approximately 6% alternative renewable energy with solar PV into the power system and currently working with donor countries and private firms to install additional capacity to meet the energy capacity targets as directed under the National and State Energy Policy and Plan. The total installed capacity is approximately 345 kwp with 198 kw at KUA compound, 100 kw at State Administration Parking Lot and 47 kw at five roof top building sites. This translates into fuel savings of approximately 1,600 gallons per month with the value of $4,300 based on current fuel price. The staff with the support of the Board continue to tap funding to increase renewable energies into the Kosrae power system.
2. KUA had performed and completed service line connection to two major customers, the Luen Thai Fishing Transshipment Operation and the Kosrae Water Bottling Company. The scope of works include installation of a 500kv transformers, electric lines and outsets to service the transshipment operation for Luen Thai and 3 phase power line installation to the Tropical Bottling Facility. Since the commencement of the Luen Thai operation, the power load has significantly increased which contribute to the financial health of the KUA operation and we anticipate increasing power load after Water Bottling Company start its operation. These will significantly support the private sectors and economic developments of the island.
3. The proposed Energy Improvement Projects submitted to JICA/Japan Gov't were finally approved during the fiscal year. The Exchange of Notes (E/N) and Grant Agreement were signed between FSM Gov't and JICA. Bids for these projects were issued and award of Bids took place during mid-October 2016. Contractual Services for these projects were signed between NBK and KUA. NBK sub-contracted Toshiba Co. for electrical installation and Daihatsu Diesel Co. for the new engine units. Mobilization and preparation of project materials are currently ongoing with actual construction to be commenced in early February 2017. The Energy Projects funded under this JICA/Japan grants are construction of a new Power Plant with two new Engine/Generator Units with a new Sub-station, Upgrading of Lelu Power Distribution Lines and Installation of two underground cables at the airport/dock area. The improvements of the existing power facility is expected to minimize system loss and reduce cost to the operation and customers.
4. The staff have continued to work with FSM and World Bank Steering Comm. to prepare technical specs of the new engine unit in compliance with the WB Procurement Policy and Term of Reference (TOR) for the Energy Master Plan for Kosrae State. Including in the WB grant allocation for Kosrae, the staff also submitted request for Street lights, one unit Bucket Truck and new 500kv Transformer for Luen Thai Transshipment Operation. Due to strict requirements under the WB procurement policy, the acquisition and installation of the new engine unit is delayed and is tentatively targeted during March 2017. The ITQ (Invitation to Quotation) is expected to finalized during November 2016 and issued to interested vendors for quotation. The management hope to procure and install the new engine unit during early part of 2017.
5. The staff and the KUA Board have several consultative meetings with the State Governors concerning the management of the Utwe Water System after completion of the Project. There were some general understanding reached in terms of when to transfer the system to KUA and finalization of proposed terms of the Transfer Agreement with needed amendments to State Law 5-38 authorizing KUA to charge water rates to customers and securing start-up funds for water operation under KUA. These are some remaining issues to be resolved before transferring the Utwe Water System to KUA. The ADB has indicated that they will provide two Water Specialist to manage the system during two years period. The management and Board will continue to work with the state gov't to iron out remaining issues before KUA start managing the system.
6. The management has submitted a concept proposal to tap the Green Climate Fund thru the assistance of Asian Development Banks with project cost of 15 million dollars. The funding for the submitted concept proposal is to finance the proposed Micro-Grid System with the Flywheel Storage facility currently negotiated and designed by the Indian Energy Pacific Inc., and funding for relocation of distribution lines infrastructure that are currently eroded along some segments of the main road and inner road power lines under the Coastal Management Project. After ADB review the concept proposal and endorsed by the FSM National Government, they will work with KUA with the detail works of the proposed project.
7. The estimated cost for the requested Power Line Extension and restoration works for Melo/Okat power line extension and Malem Inner Road were prepared and submitted to State Gov't for funding. The funding were approved by state gov't for Melo/Okat line extension and Malem restoration and extension project. The survey and staking for Melo/Okat extension lines were being performed during the period to assess the actual cost of the project and PCD were prepared and sent thru State ODA to Nat'l Finance for disbursement of the project fund. The cost assessment for the other projects will be conducted during the new fiscal year 2017.
8. KUA staff conducted public awareness programs to the four municipalities focusing more on the efficiency programs to reduce cost to customers. These are mostly appliances, equipments and electronics that use electricity concerning rated electric consumption that customers need to know before purchasing these equipments/appliances from the local businesses. This program is important to improve power efficiency both to customers and the provider.
9. KUA has continued to pursue funding for other potential renewable energies such as Ocean (Waves or Current) Energy Technologies, Hydro-Power System, Wind Power Technologies and other sources to develop for Kosrae. This is the proposed concept under the Micro-grid System that KUA has been working with the Indian Energy Pacifica, Inc. to develop for the island.
The KUA Board of Directors and staff believe that these highlighted activities and projects that were undertaken during FY2016 are major components to lead KUA and the KSG to achieve the goals and objectives stated in the Kosrae Strategic Development Plan. These driving objectives are to achieve at least 30% of renewable energies and 50% system efficiency improvements by year 2020.
I would like to conclude this report by expressing our appreciation to you and the Leaders of the Kosrae State Government for the continued support and assistance rendered during fiscal year 2016. We are looking forward to continue working with you, the Kosrae State Legislature and the respective Kosrae State Leaders to ensure that KUA continues to provide safe, reliable and satisfactory power services to the people of Kosrae and to support the developmental goal of the Kosrae State Government.
Thank you and should you have any questions concerning other aspects of the KUA operation, please let us know.
Respectfully Submitted,
Fred N. Skilling, General Manager
Kosrae Utilities Authority
