Sunday, March 18, 2018

Puerto Rico Aqueduct & Sewer Authority may seek government loan

By on February 22, 2018

SAN JUAN – The Puerto Rico Aqueduct & Sewer Authority (Prasa) could become the island’s second public corporation to seek a loan from the government or third parties to stay afloat, even though the utility is in negotiations to restructure its $4 billion debt.

The information was confirmed by government documents as well as Treasury Secretary Raúl Maldonado and Deputy Secretary Francisco Peña.

“If Prasa’s funds fall, we may also have to give them a loan,” Maldonado said. “We are looking at other alternatives so it does not have to get to that.”

Puerto Rico Treasury Secretary Raúl Maldonado (File photo)

The commonwealth and the island’s Financial Oversight & Management Board recently obtained a $300 million revolving credit line from the central government after U.S. District Court Judge Laura Taylor Swain last week rejected an initial request for a $1 billion credit line for the Puerto Rico Electric Power Authority (Prepa). The judge  argued that the request was unfair to all stakeholders and was not designed to respond to the utility’s needs.

Two Caribbean Business sources said Prasa also needs a loan from the commonwealth because it does not have access to capital markets for funding. While Maldonado said that other alternatives are being explored, government documents underline the need for funding.

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“Puerto Rico will need a liquidity facility in fiscal year [FY] 2018 to support recovery efforts and bridge the gaps at Prepa and Prasa. In addition to disaster-relief assistance, Puerto Rico requires external liquidity support to finance the recovery effort and provide necessary, interim support to Prepa and Prasa,” the fiscal plan states. The term “facility” was used in the court petition seeking interim financing for Prepa.

While Maldonado said he did not know how much money Prasa will need, sources within Prasa said the water utility has an initial $400 million financing need.

The latest treasury single account (TSA) report, which acknowledges the need to transfer revenue funds to Prasa, but does not provide an amount, notes the negative impact such a transfer could have on the government’s fragile liquidity situation.

“Prasa might also potentially require funds to be transferred from the TSA to fund their ongoing liquidity needs, which is an additional risk against the liquidity plan. The total potential TSA funding need is currently being assessed,” the government’s latest TSA publication reads. Maldonado, however, did not appear to be concerned. He said any new financing will require the court’s permission because the commonwealth is in bankruptcy.

The government has yet to make Prasa’s newest fiscal plan public, but the Jan. 24 version of the utility’s plan, the latest on public record, predicts a reduction in billings and collections that not only reflect a the period Prasa was unable to provide services in the aftermath of Hurricane Maria, but also due to fewer customers and less consumption because of the economy’s contraction and a significant outmigration from the island. Net billings are expected to be reduced by 10 percent, or $579 million, over the five-year fiscal plan. Collections are expected to drop by $883 million, or 17 percent.

Prasa, which has 4,900 workers, expects to have more than $3 billion in expenses over the next five years, despite cutting costs by more than $200 million. Disaster recovery expenses have totaled $395.6 million to date.

Prasa’s fiscal plan states that the utility has a financial need for $1.9 billion over a five-year period, including $470 million in fiscal 2018, $320 million in fiscal 2019 and $374 million in fiscal 2020. The utility expects to raise its rates to be able to obtain additional revenue this year.