Puerto Rico government explores using AFICA bonds to fund energy, health care projects.

By Eva Llorens 

Puerto Rico’s fiscal authorities are exploring new AFICA conduit bond financings to support renewable energy and healthcare projects even as the Financial Oversight and Management Board (FOMB) warns that the growing reliance on this type of debt requires greater transparency and restraint.

According to the FOMB’s latest economic report issued on Wednesday, the Fiscal Agency and Financial Advisory Authority (AAFAF) is currently in discussions with renewable power developers and healthcare institutions about potential future bond issuances through the Puerto Rico Industrial, Tourist, Educational, Medical, and Environmental Control Facilities Financing Authority, known as AFICA. The agency considers conduit financing an important engine of economic development.

AFICA, as a conduit financing entity, can issue public bonds or private placement bonds. The money raised from these bonds is then loaned to eligible projects under a loan agreement. AFICA can also act as a conduit under credit facilities from financial institutions or investors, with the proceeds loaned similarly. These financings are not guaranteed by the Government of Puerto Rico or any of its agencies.

Although no formal AFICA bond petitions were submitted to the FOMB during the first quarter of fiscal year 2026, AAFAF’s talks signal a potential uptick in new project proposals in sectors the government has prioritized — including clean energy generation and expanded medical infrastructure, the Board said.

However, the FOMB is advising the Commonwealth to move forward with caution.

AFICA bond activity has grown “significantly” in recent years, the report notes. Between 2020 and 2025, issuance levels expanded at a much faster pace than in previous periods. AFICA currently has 19 outstanding bond issuances totaling $1.2 billion, in addition to the resolution of $45 million in defaulted Tourism Development Fund obligations settled through a Title VI restructuring in 2023.

Federal rules allow AFICA to issue up to $350 million a year in tax-exempt conduit financing, with unused amounts from previous years carried forward. This financing helps private developers get lower-cost loans through a public authority without the government having to repay the debt. Still, the Oversight Board warns that increased activity raises long-term risks.

“The Oversight Board continues to urge AFICA to use this type of financing prudently to avoid exposing itself and the Commonwealth to potential long‑term risk,” the report states.

The Board also mandated stronger oversight measures, requiring the government to provide greater transparency into AFICA’s conduit issuances.“The Oversight Board continues to urge AFICA to use this type of financing prudently to avoid exposing itself and the Commonwealth to potential long‑term risk,” the report states.