Rejection of Genera amendment is setback to New Fortress Energy

Attorney Rolando Emmanuelli

By The Star Staff

Attorney Rolando Emmanuelli characterized the Puerto Rico Energy Bureau’s (PREB) rejection of the renegotiation of Genera PR’s contract as a significant setback for the power plant operator’s parent company New Fortress Energy, which is enduring a critical financial state.

“This is a hard blow to New Fortress because the $110 million would have helped them maintain credibility in the market. It is likely that New Fortress’ financial troubles will worsen, and they could file for bankruptcy at some point,” Emmanuelli said in a radio interview. “If New Fortress files for bankruptcy, that would terminate the contract because they could not sustain operations without a guarantor to support Genera in the event of financial difficulties. This could result in Genera having to exit the country [Puerto Rico].”

Genera PR, the private operator of the Puerto Rico Electric Power Authority’s (PREPA) legacy power plants, is a subsidiary of New Fortress, which serves as guarantor of the contract.

On Monday, the PREB ordered a refund of $40 million charged to consumers for fuel purchase adjustments, concluding that it does not have a formal amendment to the contract between PREPA, Genera PR, and the Public-Private Partnerships Authority under consideration.

“The Energy Bureau determined that the $40 million already charged to consumers through the fuel purchase adjustment must be refunded,” the regulatory body stated in its resolution.

A proposal for contract amendments had been submitted on Feb. 27 and subsequently amended on April 7, but it was not finalized or accepted by all parties, particularly Genera PR. Consequently, the PREB concluded that the lack of a complete and final submission prevents its evaluation.

Additionally, a previous directive allowing LUMA Energy, the electric power transmission and distribution system operator, to recover an extra $30 million during the current quarter was rescinded after Genera PR failed to accept several key required provisions, including a performance bond.

As part of the remedy, LUMA must immediately adjust current quarter bills to reflect the refund to consumers. Only $6 million was approved to be withheld, identified as an eligible fuel savings incentive during the 2024 contract year.

“There is supposed to be an immediate discount on the rate so that this money can be recovered,” Emmanuelli said. “The rate in effect at the time the discount is applied will be reduced proportionally for all consumers, allowing the $40 million to be reimbursed to the people of Puerto Rico.”

Emmanuelli, a legal expert on the Puerto Rico Oversight, Management and Economic Stability Act, commonly known as PROMESA, emphasized that the return of millions of dollars indicates a precarious situation for the power generation contractor.

“Given the circumstances, Genera’s situation is very unstable. Genera has not met any of the conditions of the contract. It has failed to execute on what it promised, which was to decommission the plants and transition us to renewable energy as quickly as possible. Instead, it has done the opposite,” he noted. “Not only has it failed to comply, but it also faces a deeper issue: its parent company. If its parent company goes bankrupt, Genera would have to leave the country because there would be no way to sustain its generation operations. The people of Puerto Rico cannot risk having a company that lacks sufficient financial support.”