— from John Fleischer —
According to Rock Island’s own business plan, their forecasted debt will rise from 25 million dollars this year, to over 26 million dollars by 2022. Projected revenue won’t even be able to cover the debt service until year 2024, much less pay off debt.
In the original conversations with OPALCO concerning the purchase of Rock Island, I was told not to worry, that OPALCO would be able use the profits gained from Rock Island to help finance projects like submarine cables hopefully starting in 2021.
OPALCO is responsible for Rock Island’s debt. How much further down the rabbit hole do we go?
According to this letter, that means Rock Island won’t be able to help offset cable costs for some years, if at all. This latest debt projection is worrisome. Does this mean our electric rates will keep going up and up? How does OPALCO plan to protect its members from continuous increases to pay for what should have been supplemented by RockIsland? I guess that’s my burning question.
In all fairness to OPALCO, they have several programs for low-income people and have been great about helping us out in this respect. But if rates keep going up and up, those can only do so much, since our incomes are not increasing – if anything, they’re decreasing, due to cost of living and real estate value increases and cuts to social services of all kinds.
I wish more people contributed to the PAL program- even the lowest-income can afford rounding up to the next dollar once a month. But that still doesn’t address the question raised in this letter, pr why the debt keeps increasing.
John: After four years of start-up building and rapid growth, Rock Island Communications is forecast to break even in 2022 and generate almost $9 million in revenue by 2024. Get the whole story: https://www.opalco.com/rock-island-poised-for-profitability-in-2024/2019/04/.
Sadie: OPALCO ratepayers do not pay for Rock Island debt or operations. Rock Island has been financially independent since 2016 when they repaid OPALCO for a start-up loan. Rock Island pays its own way, which includes payments to OPALCO for about $300k a year for things like power and use of our fiber backbone. We pay Rock Island for their IT services, too – to the tune of about $70k a year (see 2018 year-end financial report). The only people paying for Rock Island are the subscribers to Rock Island services.
The 2019 Rock Island Business Plan December Edition (public edition) actually forecasts the debt to rise to $27,017,474 in 2022, assuming I read the ‘Cash Aaccount and Debt Forecast’ graphic that doesn’t have ascenders to demarcate the year – this does not comport with the statement on page 5 of that report the ‘total lifetime maximum of debt at $26.8M’. Perhaps there is a lack of communication between graphic and the text.
The graphic indicates that debt is forecast to be less than the Cash Account in the year 2036, some 17 years from now, with significant debt payments occuring annually until then.
Page 7 of the Business Plan Rock Island forecasts that Rock Island will be able to service its debt in 2024, five years from now.
The Business Plan requests that the ‘parent company’ (OPALCO?) increase the loan guarantee by $4,000,000.
I find it difficult to believe that this level of debt guarantee and cost is entirely disassociated from the costs of OPALCO. This is a far cry from the original statement from Foster Hildreth in March 2015 (four years ago) that setting up Rock Island would cost each OPALCO member $3/month for 24 months and then we would have an income to help defray the costs of OPALCO and therefore help the membership. That forecast of benefit does not appear to have happened.
Given that I have yet to see Rock Island hit any of its forecasts, I do not place credence in their 2019 Budget Plan. It’s absurd that there is an attempt to forecast out to 2041 in the Budget Plan; hopefully Rock Island can forecast through to Q3 of 2019, that would be an achievement.
Suzanne – as a question, what is the current loan guarantee amount that OPALCO has for Rock Island?
As there appears to be no benefit to OPALCO to owning Rock Island, why not spin it out as as separate company and see how it does?
– rob
Again and again OPALCO insists that Rock Island is financially independent, yet their 25 million dollar line of credit (which is maxed out) is guaranteed by OPALCO energy members. How can OPALCO bold-face lie to 12,000 members and insist our rates are not being impacted by Rock Island, when they have a maxed out 25 million dollar line of credit, guaranteed by us? No person nor entity can walk into a bank and borrow 25 million dollars, unless they show additional income to repay the loan, which is one of the reasons why we’re seeing 5-10 percent annual “revenue increases.” According to the board materials we’re only half way through the rate increases which are projected to increase steadily through 2022. I’m planning on writing a letter, as the impact of these rate increases by a monopoly provider of an essential utility are inhumane for many residents. Although it does not seem like it is of recent times, this is still our cooperative and I believe we can fix it, if we work together.
Suzanne – I read the press release you provided a link for and I’m not sure I got “the whole story”.
Can you explain how one can claim Rock Island will be break-even in 2022 when it won’t be able to service its debt until 2024? This calls into question what is meant by “break even”; I expect this means all costs are covered with no profit left over, that would be break-even.
The generation of revenue is not the issue, so while it may turn out to be true that Rock Island can generate $9,000,000 revenue in 2024 (that would be wonderful), according to the 2019 Business Plan all the revenue is consumed by costs of doing business – there is zero profit, and that would be break-even. Perhaps you use a different definition of break-even?
If the Press Release is “the whole story”, it would help if it made sense. It would also good if it were accurate – the acquisition of Rock Island is left out and the debt figures do not match the 2019 Business Plan, those are two of the obvious details.
– rob
Rob: You’re right – it’s hard to glean the full story from a media release. Let’s get together and I’ll be happy to try and answer your questions. Contact me at solson@opalco.com to set up a time.
Suzanne, why attempt to take this private and not address Rob’s question in a public forum?
Luther – social media has it’s benefits, but it’s not a great media for going into detail. All of the details, BTW, are available on OPALCO’s website for anyone who wants to dive in.
-Suzanne, you have me there, it’s very difficult to skirt around a question when you have to put the answer down in black and white.
I’ve been through the OPALCO web site and if it clearly states what the current loan guarantee amount that OPALCO has for Rock Island I sure haven’t been able to find it.
-B. Sadie Bailey, unfortunately the reality is this whole enterprise has always been based on OPALCO forcing members/owners to subsidize RI’s expenses through consistent rate increases, even though we voted against it.