Oversight Board flags major gaps in PREPA’s emergency power contract with Gothams Energy.

The Oversight Board questioned whether proper federal due diligence and OFAC clearance were obtained regarding Gotham’s affiliate operations in Cuba. (Reference image, floating plant (patana) in Cuba. © National Electrical Union)

By THE STAR STAFF

The Financial Oversight and Management Board has raised significant concerns about a proposed long‑term agreement between the Puerto Rico Electric Power Authority (PREPA) and Gothams Energy, LLC for up to 200 megawatts of temporary emergency generation in San Juan, citing missing financial information, inconsistencies in contract language, and unresolved regulatory hurdles. 

In a letter dated March 11 of this year, the Oversight Board informed PREPA’s counsel Alex Rivera Medina and Third-Party Procurement Officer Osvaldo Carlo Linares that its review of the proposed 10‑year contract revealed “key missing information,” including the contract’s total price and maximum value, as well as deviations from the competitive procurement rules established under RFP 3PPO‑0314‑20‑TPG2. The RFP was issued by Puerto Rico’s Third‑Party Procurement Office (3PPO) in July 2025 to secure a total of 800 MW of temporary power generation across multiple sites. 

According to the Board, the contract contemplates the installation of a floating power plant, or “Powership,” in the San Juan Bay, but fails to provide a feasibility assessment regarding critical permitting requirements or a detailed plan for fuel supply logistics in an already constrained port. The Board noted that previous federal regulatory decisions—specifically U.S. Coast Guard restrictions affecting ship‑to‑ship LNG transfers—raise serious questions about whether Gothams’ proposed operations are viable without additional agency approvals. 

Because of these concerns, the Oversight Board issued a comprehensive Request for Information (RFI) requiring PREPA and Gothams to supply extensive documentation by March 18, 2026. The mandatory disclosures range from background checks and federal sanctions reviews to environmental permitting, pricing structures, interconnection requirements, and fuel‑supply contingencies. 

Regarding the background check, the Oversight Board noted that Gothams’ affiliated company Karadeniz/Karpowership has extensive operations in Cuba, supplying 25% of Cuba’s power. The Board asked to confirm whether any formal due diligence process was conducted by federal agencies to assess risk of sanctions, non-compliance or authorization to do business.  In the final evaluation report Summary dated September 30, 2025, 3PPO indicated that a clearance confirmation from the Office of Foreign Assets Control (OFAC) before the issuance of the Notice to Proceed is required as a mitigation measure following the award. The Board inquired about the status of Gotham’s OFAC clearance. 

 Among the issues highlighted, the Oversight Board cited the absence of an established contract price or rate per kilowatt‑hour, despite provisions in the document that allow for price escalations based on international LNG benchmarks. The draft contract, the Board warned, appears to heavily favor the seller by permitting upward price adjustments and early termination rights in the event of certain market fluctuations, while offering only limited downward adjustments for PREPA. 

The Board also questioned the lack of clarity surrounding Gothams’ fuel strategy, particularly statements made publicly by 3PPO leadership suggesting that the company would rely on liquified natural gas supplied by New Fortress Energy (NFE). If accurate, that arrangement could place additional pressure on the existing LNG delivery system in San Juan, where supply interruptions already force periodic reliance on diesel generation. The Board requested detailed fuel‑supply agreements, priority allocation procedures, and contingency plans. 

Operational performance requirements also came under scrutiny. The proposed contract considers generation output failures only when they exceed 20 percent below scheduled output—raising questions about alignment with industry norms—and caps Gothams’ liability at 35 percent of PREPA’s incremental replacement‑energy costs. Further, although 3PPO initially rejected a similar utilization requirement as a material flaw in the bidding proposals, the current version of the contract reinstates a clause allowing Gothams to terminate the agreement if PREPA does not dispatch the Powership at least 70 percent of the time over a rolling 12‑month period. 

The Board also pressed PREPA and 3PPO to explain why Gothams was selected for the San Juan site despite scoring materially higher in the evaluation process than another awarded supplier, and why the term of the contract—ten years for what was originally framed as emergency temporary generation—is justified given Puerto Rico’s ongoing build‑out of permanent renewable generation and battery storage. 

In addition, the Board noted procedural and transparency concerns, referencing a February 2025 request from LUMA Energy seeking basic operational information on the 800 MW portfolio because it had not been provided during Integrated Resource Plan (IRP) planning.