Deseret Generation & Transmission Co-operative came through with a $16 million payment to the federal government on Tuesday, thus avoiding default on a $525 million obligation.
In addition, creditors, including the federal Rural Electrification Administration, signed a "stand pat" agreement Wednesday that will give the beleaguered co-operative until July 31 to work out a long-term debt restructuring to solve its current fiscal dilemma, said Soren Sorensen, the manager of finance for DG&T.REA spokeswoman Ruth Ann Mason said the payment will keep DG&T current with the REA and other creditors and the agreement will provide an interim mechanism for the company to continue operations while the restructuring is accomplished. Mason said DG&T was assigned to the agency's work-out committee early in 1988 when financial problems began to surface.
DG&T, a Salt Lake-based public power company, serves some 30,000 customers in six rural electric associations. The co-operative avoided default in July by borrowing $29 million to make its mid-year payment. Whether the company could meet its January obligations was questionable.
Mason said the company made a payment to REA in September that met administration requirements and that just over $7 million of the Jan. 3 payment will go to REA to keep that obligation current.
"If everything works out, we may be able to make our entire March payment," said Merrill Millett, DG&T general manager. "But, if we don't, this agreement will allow us to do what we can while we work out a long-term restructuring."
DG&T's problems began shortly after construction of the $1.3 billion Bonanza Power Plant near Vernal. The prospects of a boom economy related to energy development in the area made the plant look like a good investment. After completion, though, the energy boom fizzled and the co-operative found itself with a 400-megawatt power plant but no customers.
In 1985, the problem seemed solved when Shell Leasing Co. bought the plant in a leveraged lease agreement with DG&T. Bleak economic conditions also doomed that effort, and while it no longer owns the plant, DG&T remains saddled with a long-term lease agreement and no revenues to offset the cost.
DG&T has negotiated some major power sales in Nevada and California, and once transmission lines are in place, much of the surplus Bonanza power will be turned to revenue. But those lines are not expected to be in place until the mid-1990s.
It is that interim period that is the problem, although officials from both REA and DG&T believe debt restructuring is viable. Mason said REA's concern is setting up a plan that guarantees the full debt obligation is eventually recovered. She said that appears feasible and is why REA is working with DG&T.
To spur implementation of the new contracts, Millett said DG&T has been working with its new customers to hasten construction of the transmission lines. "We have transmission capabilities to Mona, Juab County, which is the delivery point," Millett said. "It is their (the new customers') responsibility to bring lines to that point and pick up the power. We're working closely with them and are doing all we can to help that effort."
Unfortunately, the proposed merger between Utah Power & Light Co. and Pacific Power, which will significantly affect power transmission agreements within Utah, will not help DG&T.