Prepa restructuring support agreement extended again
By Philipe Schoene and Eva LLoréns
SAN JUAN – The Puerto Rico Electric Power Authority’s restructuring support agreement (RSA) was extended to April 13 to enhance the terms of the deal reached on 2015 with the AdHoc Group of Bondholders, fuel line lenders, monoline insurers and the Government Development Bank to restructure the utility’s $9 billion debt.
Sources involved in hammering out a final RSA for the electric utility told Caribbean Business that another forbearance agreement extending the deadline by five days had been struck at the 11th hour to tie loose ends on several issues.
Contrary to preliminary news reports that a deal with the Prepa had been struck, there are still several sticking points in negotiations tied to liquidity issues according to sources involved in the ongoing talks. In its Thursday statement, La Fortaleza merely said an agreement had been reached in principle.
“We are very close to a final deal, but we are still sizing up a liquidity issues,” one source with knowledge of negotiations explained. “They are going to need extra money for the overhaul of infrastructure. We want to make sure that they are in a strong liquidity position to fund critical infrastructure projects.”
“Essentially the RSA was extended by another five days to tie up loose ends,” a source with knowledge of negotiations told Caribbean Business. “There is agreement in principle on several items—but not a deal that we can confirm because everything is not set in stone.”
Among the items that remain up in the air are concessions by monoline bond insurer National Finance Guarantee Corp., which are being handled by financial adviser Rothschild directly.
Points of agreement were found in the composition of the Prepa board, which is made up of three governor appointees, three independents, two consumer representatives, and one representing the business sector.
La Fortaleza, which has been seeking changes to the RSA, said in its statement that the administration estimates the enhancements to the RSA will achieve $2.2 billion in debt service savings between 2018 and 2022 as compared with the contractual terms of the debt.
These savings represent $1.5 billion in additional savings versus the existing terms of the RSA. The changes also are designed to allow Prepa to take the steps necessary to modernize its operations and implement the administration’s energy policy, including attracting new private investment and public-private partnership programs. The administration estimates that the enhanced RSA will result in individual ratepayer transition charge savings of 36% for the 2018 through 2022 period, representing a reduction of the average household annual electricity bill by about $90 a year over the next five years.
“The enhancements to the RSA were the result of good faith negotiations by my team and Prepa’s major creditors. I believe that the negotiated terms represent fair additional contributions by all parties to the RSA and will set Prepa on a path toward becoming a modern utility that will provide reliable power at sustainable rates to the people of Puerto Rico,” Gov. Pedro Rosselló says in La Fortaleza’s release. The agreement’s enhancements are being reviewed but have not yet been approved by the Promesa oversight board, it adds.