In an effort to prop up the debt-laden Puerto Rico Electric Power Authority (PREPA), Governor Alejandro Garcia Padilla has submitted a new proposal to the Legislative Assembly that would clear the way for third-party investments in infrastructure projects within the US territory.
A key component of the legislative proposal is the inclusion of a measure that would create a competitive bidding process and allow entrance into public-private partnerships (PPPs; P3s) by the government.
This fiscal year alone, PREPA is facing a $1 billion revenue shortfall, and already the utility is burdened by an $8.3 billion outstanding debt load. On January 1, 2016, a $196 million interest payment is due to bondholders. The restructuring would be the first of many steps toward reducing the $73 million total debt load carried by Puerto Rico.
Along with new tools for refinancing of PREPA's outstanding bonds, the proposal would allow PREPA to invest as much as $2.4 billion in new upgrades to its power plant assets.
To date, the utility has been unable to successfully modernise its energy generation assets, and maintains a strong dependence on foreign oil, which comprises about 72 percent of its total energy mix. The remainder of energy needs are met through natural gas (18 percent), coal (8 percent), and renewable resources (approximately 2 percent).
This situation has resulted in Puerto Rican customers paying some of the highest energy prices in the US, with rates between two and three times higher than the national average. Residential rates range between $0.26 and $0.29 per kilowatt-hour (kWh) and business rates are four to five cents higher, according to Greenbriar Capital.
Along with financial revisions, the revitalisation act would allow the utility to establish an independent board of directors, adjust its hiring and firing practices, and change how outstanding bills are collected from both the public and private sides.
Javier Quintana Mendez, executive director at PREPA, who was highly supportive of the proposal, said in a statement, “With this legislation, we can realise 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.”