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The Honolulu Advertiser
Posted on: Friday, January 29, 2010

A&B to continue Maui sugar at least through 2010

By Chris Hamilton
Maui News

WAILUKU Sugar production on Maui got a reprieve yesterday, at least through the end of the year.

Alexander & Baldwin Inc.'s board of directors met in Honolulu yesterday morning to mull over shuttering its Maui subsidiary, Hawaiian Commercial & Sugar Co., after it recorded about $45 million in losses over the past two years.
In a statement, the company said it would continue sugar operations through the end of the year, but that the company's fate beyond 2010 would depend on a "favorable outcome" in water cases pending before the state Commission on Water Resource Management, as well as HC&S' ability to increase its sugar production levels.
An attorney for the environmental and Native Hawaiian groups that are petitioning the state to order HC&S to return more water to Maui streams called the company's announcement yesterday a "stunt" aimed at pressuring the water commission to give it what it wants.
Asked yesterday when the board of A&B would reevaluate the sugar company's fate, HC&S General Manager Chris Benjamin said, "It's hard to say. No later than the end of the year, but (the review) could happen at any time. It will depend on whether there's an adverse development, if it's a water decision or something else.
"I think bottom line is we lost $45 million over last couple years," Benjamin said. "I don't think anybody in any business can stay open without some pretty strong assurances you are going to turn around the business and sustain it. And for us, our greatest resource, other than our employees, is water. We're not playing games. Any other business would have gone under if they encountered far less stress."
On top of its mounting losses, HC&S said it has faced a near-drowning confluence of low yields because of a three-year-old drought, plus fluctuating commodity prices and high fuel and other fixed costs, such as health care.
Finally, HC&S is battling a two-front assault on its existing water sources on Maui, with decisions expected soon on its diversions from Na Wai Eha in Central Maui and from 19 East Maui streams.
It's that last issue that has left HC&S stream-diversion opponents accusing the company of utilizing woe-is-us tactics in order to get sympathetic decisions soon from the state Water Resource Management Commission.
"This is pure politics," Earthjustice attorney Isaac Moriwake, who represents taro farmers and environmentalists who want the water returned to the streams. "It's an extension of the same old song and dance. The problem for them is that members of an impartial commission and members of the public who are paying attention are not going to persuaded by stunts. This is outrageous."
International Longshore and Warehouse Union Maui Division Director William Kennison said his members are "very, very pleased" with the board's decision yesterday.
"We're still worried, but hoping the water commission will make sure we get enough water to keep us going," Kennison said. "There's a lot of hope today."
Board members didn't make their announcement until after the New York Stock Exchange closed Thursday, with A&B stock trading at $32.21 a share, down just 2.45 percent for the day in lower-than-average trading.
In just the next two months, the Department of Land and Natural Resources water commission members have said they will come up with judgments meant to balance the needs of HC&S which draws an average 200 million gallons a day to water 37,000 acres with those who have tenaciously petitioned the state to see the streams restored for the past nine years.
In addition to water decisions, A&B will consider HC&S' ability to attain higher sugar production levels, Benjamin said. He said that sugar prices in the United States have risen in 2010 as other countries suffered bad weather; and more rain recently in Maui has translated into higher yield forecasts.
The combination has "bought HC&S additional time to prove its viability," Benjamin said.
"Production is expected to increase, primarily as a result of the return to near-normal rainfall levels over the past year," he said.