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  • The San Juan Daily Star

Senate approves House bill enabling the ‘PREPA Debt Restructuring Law’

The most significant aspect of the proposed law is that it would cut the Puerto Rico Electric Power Authority’s $9 billion debt by 75%.

By The Star Staff

The Senate approved House Bill 1383 over the weekend, which would create the “PREPA Debt Restructuring Law” and establish certain conditions for debt restructuring and the issuance of bonds by the Puerto Rico Electric Power Authority.

The most significant aspect of the proposed law is that it would cut PREPA’s $9 billion debt by 75%. The utility has been in bankruptcy since 2017.

Under the bill, the Puerto Rico Energy Bureau would establish the conditions that would allow PREPA to execute bond issuances.

“This law is approved pursuant to that exclusive authority of the Legislature of Puerto Rico. Both the Financial Oversight and Management Board and the United States Courts have recognized the exercise of legislative authority in debt restructuring,” the bill states. “Also, they have validated the full authority of the Legislative Assembly to regulate the functions of public corporations. This Law is approved in compliance with this constitutional and legal power.”

The measure provides that the payment of PREPA’s debt may not “go against the public policy approved for a resilient, reliable and robust energy system, with fair and reasonable rates for all classes of consumers and, more importantly, to preserve human life.”

It also specifies “the most absolute and energetic rejection of any Adjustment Plan, Restructuring Agreement or Creditor Agreement that includes an increase in the electric service bill, including any direct or indirect charge imposed on the self-generation of energy through renewable sources, for the payment and restructuring of PREPA’s debt.”

Likewise, it requires “respecting the order of priorities” so that PREPA pays its operating expenses and meets its obligation to the Retirement System of its employees before any other type of debt.

The bill rejects “any Adjustment Plan, Restructuring Agreement or Creditor Agreement that harms, threatens, subordinates or reduces pensions, annuities, benefits and other current credits of pensioners and that undermines the rights provided in the collective agreements of the workers and their current rights as active participants in the PREPA Employees Retirement System.”

It also rejects “the intention to use” sections of the Puerto Rico Oversight, Management and Economic Stability Act, the Bankruptcy Code, “or any other mechanism of the bankruptcy process, to impose additional cuts on retired public servants and participants in the Employees Retirement System of PREPA or reject the collective agreements of PREPA workers.”

The legislation is virtually stillborn because PREPA’s creditors are currently negotiating a new deal to restructure the debt. The Financial Oversight and Management Board represents PREPA in bankruptcy proceedings under PROMESA.

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