Fiscal board seeks data on Gothams Energy project, questions viability.

The Financial Oversight and Management Board noted that the Costa Sur site -- Gothams Energy’s originally proposed location for a 200-megawatt temporary power generation unit -- has already undergone a full logistics assessment.

By THE STAR STAFF

The Financial Oversight and Management Board has formally requested additional information from the Puerto Rico Electric Power Authority (PREPA) and the Third-Party Procurement Office (3PPO) regarding a proposed 200-megawatt (MW) temporary power generation contract with Gothams Energy LLC, citing unresolved concerns about the project’s viability, pricing structure, fuel logistics and regulatory compliance.

In a letter dated April 7 and addressed to PREPA General Counsel Alexis Rivera Medina and 3PPO President Osvaldo Carlo Linares, the oversight board’s general counsel, Jaime El Koury, said responses previously submitted by the 3PPO to a March 11 request for information (RFI) were “incomplete or insufficiently supported.”

The proposed contract stems from Request for Proposals No. 3PPO‑0314‑20‑TPG2 and would place a floating power generation unit at the San Juan site for a 10‑year term. According to the oversight board, unanswered questions remain regarding site selection, fuel supply arrangements, interconnection capacity, pricing assumptions, and exposure to global liquefied natural gas (LNG) market volatility.

The board said its primary concern is whether the Gothams Energy project is operationally viable, particularly at the San Juan site, which faces logistical and infrastructure constraints. The entity also questioned whether the project could achieve the utilization levels required to remain commercially viable throughout the proposed decade-long contract.

Under the proposed terms, Gothams would have the right to terminate the contract if utilization falls below 70%, or roughly 6,132 operating hours per year. However, the oversight board noted that LUMA Energy, the energy system operator, has not yet provided a certified dispatch projection to support that level of generation demand.

“Without clarity on projected utilization,” the oversight board wrote, “there is uncertainty as to whether the Proposed Contract could achieve the utilization levels required to remain operationally viable.”

Another major concern centers on pricing. The proposed contract sets a base price of $0.188 per kilowatt-hour for electricity generated at San Juan, but includes a “Market Protection Mechanism” tied to the Dutch Title Transfer Facility (TTF) index, a European natural gas benchmark.

The oversight board warned that recent volatility in the European gas market could expose Puerto Rico ratepayers to higher costs. TTF prices nearly doubled between December 2025 and late March 2026, potentially triggering price adjustments under the contract. While the contract allows for upward price adjustments if LNG prices rise more than 7% above the benchmark, the board said it appears to limit downward adjustments, raising questions about whether the mechanism disproportionately benefits the seller.

The oversight board requested clarification on whether the contract would commence at the base rate or an adjusted rate reflecting current LNG market conditions, and asked for updated pricing scenarios using March 2026 TTF data. It also asked for a comparative analysis of price volatility between the TTF index and the Henry Hub benchmark used in other Puerto Rico gas contracts.

Despite Gothams proposing a dual-fuel powership capable of operating on both LNG and diesel, the oversight board noted that the contract is structured exclusively around LNG use. The board requested an explanation of why diesel scenarios were excluded and how pricing and performance obligations would change if LNG supplies were disrupted.

The lack of a finalized LNG supply agreement also raised concerns. According to the 3PPO’s prior responses, Gothams has not yet secured a binding fuel contract, and it remains unclear which supplier would serve the San Juan site. The oversight board emphasized that San Juan’s port faces significant constraints, including U.S. Coast Guard restrictions on ship-to-ship LNG transfers and limited capacity for increased vessel traffic.

In contrast, the Costa Sur site -- Gothams’ originally proposed location -- has already undergone a full logistics assessment and can accommodate a floating storage and regasification unit, does not require dredging, and has fewer infrastructure hurdles. The board asked why San Juan was selected despite its higher execution risk.

The oversight board also pressed for clarity on grid interconnection. According to LUMA, only 124 MW of the proposed 200 MW can currently be accommodated at the San Juan site without transmission upgrades. Yet the proposed contract contemplates the full 200 MW.

The board questioned why PREPA and the 3PPO proceeded with a San Juan-based proposal that exceeds known interconnection capacity, particularly when Costa Sur reportedly has available capacity for the full output.

The board also raised concerns about cumulative generation at the San Juan substation, noting that existing units, the Energiza project, and the proposed Gothams facility could more than double the site’s allowable injection capacity under current system conditions.

The oversight board went on to request additional documentation related to federal sanctions compliance. While the 3PPO indicated that it had contacted the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), no confirmation or determination had been received. The board asked for copies of the inquiry, updates on OFAC’s review, and an explanation of why approval is being sought before full sanctions clearance is obtained.

Next steps

The oversight board said it will discuss the aforementioned issues during a previously scheduled April 9 meeting regarding a separate PREPA power contract with Power Expectations LLC. PREPA and the 3PPO were instructed to submit the requested information by Friday, April 10.

To date, PREPA has submitted two contracts resulting from the RFP for oversight board review: a 400‑MW proposal at Aguirre with Power Expectations and the 200‑MW San Juan proposal with Gothams Energy.