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  • The San Juan Daily Star

Governor: Too soon to endorse PREPA debt plan

Gov. Pedro Pierluisi

By The Star Staff

While the Puerto Rico Electric Power Authority (PREPA) appeared to support the plan to restructure its $10 billion in debt, Gov. Pedro Pierluisi Urrutia said Tuesday he was not yet ready to go along with the debt deal because it was not final.

The Financial Oversight and Management Board, PREPA’s representative in Title III bankruptcy court, is proposing to cut PREPA’s unsustainable debt by 48%, to some $5.4 billion. While the bondholders are seeking payment of an estimated $8.3 billion in bonded debt, the oversight board is trying through litigation to disallow any secured claim held by the bondholders beyond the estimated $16 million in funds actually deposited in a Sinking Fund, and limit any potential recourse, secured or unsecured, to the monies deposited in the Sinking Fund.

“I am not endorsing this plan yet, because I want to see where it ends. We still do not know exactly what the debt amount is,” the governor said in response to questions at a press conference. “For me it would be premature to be endorsing something when we don’t know, nobody knows, exactly what the debt will be after the restructuring.”

In the governor’s opinion, the scenarios that have been raised regarding the charges that PREPA clients will have to pay in the latest debt adjustment plan (PAD by its Spanish acronym) are not necessarily real.

“This is a complex issue; some are creating negative scenarios, when we are not there yet,” Pierluisi said. “The important thing now is that this continues before the federal court and we will know in due course what the ‘reduction’ of that debt is and I want it to be the largest possible.”

The governor said the entry of renewable energy and the construction of new projects will generate savings in the operations of PREPA. However, he did not dismiss the possibility that clients will have to pay more to cover the debt.

“It does not necessarily entail an additional payment,” he said. “But the Authority’s debt is part of its expenses and yes, the people of Puerto Rico are the ones who pay for the Authority’s expenses, whatever they may be, including its debt.”

Fernando Gil Enseñat, the chairman of PREPA’s governing board who also heads the board’s bankruptcy committee, praised the PAD because it reduces the debt significantly even though a final debt amount has yet to be determined.

Gil Enseñat believes the plan recognizes the independent role of the Puerto Rico Energy Bureau, “which the government defends and will continue to defend.”

The plan, however, establishes that the Puerto Rico Oversight, Management and Economic Stability Act, commonly known as PROMESA, will have preemption over laws that allow the PREB to make determinations involving rates and bond issuances.

“The plan does not include any ‘sun tax’ nor does it discriminate against people who opt to install solar panels at their homes, and it seeks to protect the most vulnerable from rate increases,” Gil Enseñat said.

“There will only be volumetric charge if the citizen consumes more than 500kv [kilovolts] of energy,” he said during a PREPA public meeting in Fajardo.

To fund new bonds that will be issued under the proposed PAD, officials are proposing a temporary, hybrid transition charge, called the “Legacy Charge,” that will be added to PREPA’s rates to allow for sufficient net revenues to provide a source of repayment.

The legacy charge may involve both a volumetric component based on customer class and a customer’s electricity use, and/or a flat monthly connection charge for being connected to PREPA’s electricity grid, based on customer class.

Based on electricity demand projections pursuant to PREPA’s 2022 certified fiscal plan, the legacy charge is expected to generate some $5.4 billion of revenue over the next 35 years.

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