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Japan balking at picking up utility infrastructure loans

Date Posted: 2010-08-12

It’s more than politics that appear to be slowing plans for relocating 8,000 Okinawa-based U.S. Marines to Guam, as Japanese officials are preparing to reject providing Guam Power Authority and Guam Waterworks Authority with loans to beef up their infrastructure.

Japan’s commitment to loan the Guam utility companies $740 million [¥63.2 billion] was contained in the 2006 Japan ~ U.S. Agreement that calls for moving 8,000 Marines to Guam by 2014, once Futenma Marine Corps Air Station is relocated from Ginowan City to northern Okinawa. Guam’s existing infrastructure cannot handle the influx of military personnel and families, and requires a massive upgrade before construction and personnel movement can be accomplished.

The problem, Japanese sources say, is learning Guam’s two beleaguered utility companies would probably wind up defaulting on the loans if they were granted, leaving Japanese taxpayers footing the bill. They say the wastewater disposal improvement project, as now designed, is already forecast to lose money, so Japan is planning to step aside. There was discussion of Japan and Guam creating a separate company to operate utilities, but sources say that can’t work because Guam Waterworks Authority facilities would be required.

Of the $740 million, $415~435 million would fund a sewage project, while $160~165 million would improve the tap water system. The other $160~170 million would fund improvements to the island’s antiquated electrical power grid system. A U.S. Government report says Guam Wasteworks Authority is deeply in debt due to low revenues from sewage bills. It says GWA probably couldn’t repay sewage system-related portions of loans, noting “the ability of GWA to secure necessary funding remains a key concern and a potential impediment” to the Marines’ transfer.

If the loans do not go through, the U.S. Government report says it would be inevitable for the Defense Department to “delay or not issue construction contracts…until such time as the financing is received from the government of Japan.” Such a development, the report states, “would severely impact the construction pace and the ability of the U.S. Navy to complete required construction to support the Marine Corps relocation” from Okinawa to Guam.

Tokyo is now predicting that a combination of factors, including the utilities and other infrastructure and construction issues, could push the completion date to as far as the end of 2010. Japanese government sources say “loans, if carried out as currently planned, would hardly be collectible, and the government cannot help but refuse to make the loans.”

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