PREPA, FEMA & Cobra disagree on payments for post-hurricane work

The payments under dispute are for work performed by Cobra Acquisitions in the wake of damage caused by hurricanes Irma and Maria in 2017 and Hurricane Beryl in 2018.

By The Star Staff

The Puerto Rico Electric Power Authority (PREPA), Cobra Acquisitions and the Federal Emergency Management Agency (FEMA) continue to disagree over millions of dollars in charges for work to restore the island electrical grid destroyed by hurricanes.

The information appears in a recent joint status report submitted to the federal Title III court overseeing PREPA’s bankruptcy.

Specifically, the payments are for work performed by Cobra in the wake of damage caused by hurricanes Irma and Maria in 2017 and Hurricane Beryl in 2018. Those payments were delayed following criminal charges against former Cobra President Donald Ellison, who ultimately pleaded guilty to offering gratuities to a FEMA administrator in exchange for a contract.

Cobra believes it is owed at least some $69 million under the first of two contracts, excluding interest. It is seeking $135 million under the second contract.

FEMA has approved $84 million in payments. Still, according to the status report, PREPA has delayed disbursing the payments because it needs an engineer to conduct an internal review of the payments. Most of the PREPA staff has moved to LUMA Energy.

PREPA is also appealing FEMA’s denial of $73.7 million that Cobra invoiced, the status report said.

According to the joint status report, Cobra also argues that it is owed $77 million in tax reimbursements, of which PREPA has paid only $16 million under the first contract. PREPA’s position is that Cobra’s claimed tax reimbursements are substantially overstated and do not represent actual taxes paid to the government of Puerto Rico in excess of 8.5%, and that no further tax reimbursements are owed to Cobra.

The balance of the amounts owed under the first contract relate to work performed concerning Hurricane Beryl, mobilization, and other miscellaneous invoices. The payment of the unpaid amounts is some $7.5 million. PREPA disputes Cobra’s entitlement to those amounts.

Cobra argues that it is owed $135 million under a second contract, of which PREPA has already paid $52 million, more than the amount FEMA determined eligible for reimbursement.

FEMA found Cobra is owed $233.7 million under a different part of the contract -- $68.1 million less than Cobra invoiced -- and paid PREPA $210.3 million of that amount.

PREPA paid $130.2 million to Cobra, and the rest depends on PREPA’s internal review. PREPA disputes about $20 million.

Given the intention of the parties to begin mediation sessions in the coming weeks to resolve PREPA’s bankruptcy, the government, meanwhile, wants to maintain a litigation stay through at least Oct. 31 to allow mediation to proceed and, it is hoped, yield a settlement.

Cobra contends that avoiding setting a litigation schedule is precisely the wrong tack to take, the report says.