Lawyer: PREPA debt deal to increase payments to bondholders
By The Star Staff
Rolando Emmanuelli, a lawyer involved with the Puerto Rico Electric Power Authority’s (PREPA) bankruptcy process, predicted that the proposed amended PREPA debt deal that the Financial Oversight and Management Board plans to submit on Aug. 18 in all probability will increase payments to bondholders and lead to rate hikes.
U.S. District Judge Laura Taylor Swain agreed last week to an extension requested by the Financial Oversight and Management Board to submit the revised debt deal on Aug. 18. The deadline for the parties to file the Joint Status Report with a proposed litigation schedule for confirmation proceedings is now Aug. 23.
In justifying the extension, the oversight board said it has continued to negotiate with mediation parties and that as a result of these efforts, it had reached an agreement in principle with a substantial number of holders of PREPA bonds to settle their respective claims against PREPA.
“The Oversight Board and these PREPA bondholders are currently in the process of finalizing the necessary documents to effectuate this agreement, including but not limited to a bond purchase agreement and restructuring support agreement (RSA),” the oversight board said. “The RSA will be open for all PREPA bondholders to join. The Oversight Board has already approved the agreement in principle.”
Emmanuelli noted that the oversight board has said it will pay out $2.5 billion to creditors, excepting retirees. In June, Swain limited to $2.38 billion the amount of utility net revenue that bondholders have a claim to. PREPA has about $8.4 billion in bonded debt.
“In all probability, the agreement means the Board will pay more and that means a rate hike,” Emmanuelli said through the Bufete Emmanuelli channel on YouTube, adding that otherwise bondholders would not have joined an agreement in principle.
While the oversight board has not revealed the names of the bondholders that have joined the agreement in principle, GoldenTree Asset Management in a court document said it hasn’t been invited to or participated in any settlement discussions. GoldenTree held $1 billion in PREPA debt as of February.
Emmanuelli also said that given the delays, including parties filing opposition to the plan and related litigation, the debt adjustment plan will be confirmed next year.
The oversight board is already seeking a local advisory firm to assist in any future bond issuance in connection with the PREPA adjustment plan and has requested that all proposals be submitted by Aug. 19.
The oversight board said the Title III PREPA bonds are likely to be issued in accordance with the existing PREPA statute without any new legislation adopted in connection with any such issuance.
Gas facility opponents to seek rehearing with federal regulator
Meanwhile, Emmanuelli also said groups opposing the construction of a liquefied natural gas (LNG) duct facility by NFEnergia, a subsidiary of New Fortress Energy in San Juan, will be seeking a rehearing with the Federal Energy Regulatory Commission (FERC) after the entity allowed certain construction work to continue.
In May 2020, NFEnergía began operation of an LNG import terminal in San Juan Harbor and commenced supplying gas to two existing electricity generation units (Units 5 and 6) at the San Juan Power Plant. NFEnergía built the LNG Terminal and began operations without obtaining FERC authorization and depriving impacted communities of the comprehensive federal review of health and safety impacts that they were entitled to under the National Environmental Policy Act.
In March 2021, FERC issued an order determining that it did have jurisdiction over New Fortress’s LNG terminal in San Juan Harbor, and that NFEnergía had to submit a permit application and seek after-the-fact authorization for the Terminal. NFEnergia appealed the ruling.
Around the same time, NFEnergía was awarded the contract to convert Units 5 and 6, which were originally diesel-burning, to be “dual fuel” capable, meaning the units can now be powered by either methane gas or diesel as before.
In September 2021, NFEnergía submitted an application for after-the-fact approval of the unpermitted LNG terminal, in FERC Docket CP21-496-000.
Opponents said NFEnergía’s application was riddled with omissions and errors, leading FERC staff to express serious safety concerns about the potential for explosions, the risks for uncontained vapor cloud dispersion, or seismic events causing soil liquefaction under the facility due to NFEnergia’s poor foundation design.
In the spring this year, nonetheless, NFEnergía expanded the unpermitted LNG terminal, increasing the LNG input to allow NFEnergía to supply gas to generating units in Palo Seco, using a “virtual pipeline” of trucks carrying LNG containers.
On July 20, NFEnergía submitted a two-page application, demanding that FERC issue an approval under the Natural Gas Act.
New Fortress subsidiary Genera PR has claimed an emergency requiring immediate installation of new “temporary” gas-fired generation units. Meanwhile, its other subsidiary, NFEnergía, stands to collect billions in taxpayer dollars to fuel those units.