Puerto Rico Gov. Padilla floats bill to restructure debt-strapped PREPA

Dive Brief:

Puerto Rico Governor Alejandro Garcia Padilla has sent a bill to the island's legislature to allow its ailing electric utility to restructure debt and modernize the electricity grid, while seeking to keep rates stable for customers, Bloomberg reports.
The Puerto Rico Electric Power Authority (PREPA) is facing a $1 billion shortfall this fiscal year, with about $8.3 billion in debt outstanding.
The PREPA Revitalization Act, along with facilitating debt restructuring, also allows the utility to implement an independent, non-political, staggered board structure while implementing a competitive bid process for infrastructure investment.

Dive Insight:

Puerto Rico Gov. Padilla has asked the island's legislature to approve measures that will restructure PREPA, allowing the utility to meet debt obligations, operate without political influence, keep rates stable and modernize the grid. According to Bloomberg Business, the bill would allow PREPA to invest $2.4 billion in power plant upgrades.

"This bill will facilitate PREPA's transformation and usher in a new era of efficiency, reliability and safety at PREPA," Executive Director Javier Quintana Mendez said in a statement. "We need all stakeholders to come together and share the burden of social and economic responsibility."

The government's proposal includes: Changes to PREPA's governance processes so that the utility can implement an independent, non-political Board of Directors; adjustments to the utility's practices for hiring and managing management personnel; and changes to PREPA's processes for collecting outstanding bills from both public and private entities.

The measure would also implement a competitive bidding process for soliciting third party investment in PREPA's infrastructure, the utility said, and allow refinancing of PREPA's outstanding bonds through a new securitization that will reduce the utility's indebtedness and cost of borrowing.

"With this legislation, we can realize the debt relief and savings offered by the creditor compromises and make the changes and investments needed to ensure that PREPA can provide the people and businesses of Puerto Rico with reliable power, stable rates and outstanding customer service for generations to come," Mendez said.

PREPA's fiscal year ends in June, and the utility faces a $1 billion shortfall, as well as a $200 million interest payment the beginning of next year.

While Puerto Rico's climate and location gives it significant renewable energy potential, the utility has struggled to modernize its generation fleet, leaving residents with some of the highest power prices in the nation — between $0.26 and $0.28/kWh, according to Greenbriar Capital. 72% of the island's electricity comes from buring petroleum, 18% from natural gas, and 8% from coal, with renewables, including hydro, comprising the rest.

bet 55% of Puerto Rico’s electricity came from petroleum, 28% from natural gas, 16% from coal, and 1% from renewable energy.