Deseret Generation & Transmission Cooperative has successfully restructured its debt and will continue operating its 400 megawatt power plant near Vernal.
The beleaguered power company has been struggling for three years to work out the restructuring with Shell Leasing Co., the Rural Electrification Administration and the National Rural Utilities Cooperative Finance Corp.The cooperative has used a "stand-still" agreement with its creditors for the past two years to prevent bankruptcy.
Under the new agreement, Deseret's debt service and its rental obligations on the Bonanza power plant will be reduced until 1996, when Deseret is expected to have greater access to power markets through transmission projects now in the planning and development stage.
Deseret's $1.1 billion debt will be divided into two parts, "A" obligations and "B" obligations. "A" obligations make up 81 percent of the debt and are scheduled to be repaid by 2025. The remaining "B" obligations will become a contingent obligation with required payment any time the cooperative generates sales or revenues greater than projections and after paying operating costs and the "A" obligations.
The plan must still be approved by the Utah Public Service Commission and by cooperative members, whose power purchase contracts must be amended. Company officials expect the approvals by early January.
If Deseret meets the restructured repayment plan, creditors will forgive the remaining balances, if any, of the "B" obligations in 2026.
Deseret was formed in 1978 by six rural electric cooperatives. In 1981, construction began on the Bonanza plant, which was expected to provide power to the growing energy industry in the Uinta Basin. Before the plant was completed, the bottom fell out of the energy market, leaving the project in financial limbo.
The company's financial dilemma is expected to ease once transmission lines are completed and the company gains access to southern California markets for additional firm contract sales.