Thursday, November 23, 2017

Puerto Rico fiscal board asks US House committee for tools to appoint chief power utility officer

By on November 7, 2017

SAN JUAN – While Financial Oversight and Management Board Executive Director Natalie Jaresko said Tuesday her panel is not seeking additional responsibilities or tools to help Puerto Rico recover from the damage caused by hurricanes, she did ask for congressional clarification of its authority to appoint a chief transformation officer for the Puerto Rico Electric Power Authority (Prepa).

Jaresko’s remarks are part of her prepared testimony for a House Natural Resources Committee oversight hearing Tuesday to examine the board’s role in the challenges faced in Puerto Rico’s recovery in the aftermath of hurricanes Irma and María.

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“Like the people and Government of Puerto Rico, Congress and the administration, we know that the hurricanes have produced new realities we must deal with as wisely and faithfully as we can. I can give one example of where congressional clarification and ratification of our authority may well be critical—the appointment of the Prepa chief transformation officer. We believe our authority—and responsibility—under Promesa and basic bankruptcy tenets is clear. However, our authority is being vigorously opposed by some parties in the Title III proceeding,” Jaresko said in a written statement.

She added that congressional clarification would help resolve what “otherwise is potentially very damaging litigation.”

A month after the storm hit the island, the board announced its intent to appoint Promesa’s revitalization coordinator, Noel Zamot, as CTO for the island’s power utility. The board made the announcement amid the scandal prompted by a $300 million contract awarded to Whitefish Energy Holdings, a Montana-based firm that reportedly only employed two people and lacking much of a track record, that was alleged to be politically influenced because the firm’s owner had connections to Trump administration cabinet member. Interior Secretary Ryan Zinke and the White House have since denied playing in role in the awarding of the contract.

Revitalization Coordinator Noel Zamot and fiscal board Executive Director Natalie Jaresko (Jaime Rivera/CB)

Opponents of the fiscal board intention, including Gov. Ricardo Rosselló and Prepa’s creditors, contend Promesa does not grant the board the power to appoint a CTO. In debt proceedings, the debtor remains in control of its assets. Puerto Rico’s legislature on Monday also came out against the move.

The U.S. House committee, which oversees Puerto Rico matters, had asked Jaresko prior to Tuesday’s hearing about additional tools the board needs to ensure that federal funds are properly spent, as part of a plan that makes sense for Puerto Rico’s future.

Jaresko said that while the question is expressed in terms of “need,” the board was not seeking additional responsibilities nor tools to go with them, but that it would be willing to accept new responsibilities if that were the case.

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“Similarly, if Congress determines that clarification and reaffirmation of our existing authority in light of the new demands placed on all of us by the necessity of hurricane recovery will be useful to avoid litigation and the uncertainty, time and cost it entails, we would of course welcome that,” she said.

However, Jaresko stressed it would be helpful if Congress clarified the board’s power to appoint a CTO to oversee Prepa, as there are parties opposing the move. Prepa is one of the government entities that earlier this year filed for Title III bankruptcy after the board rejected an agreement with creditors to restructure its $9 billion debt.

Jaresko said Prepa needs to be transformed because mismanagement has led to an expensive, outmoded and unstable utility.

“We should plan and build for a better power sector and one that can move rapidly toward attraction of private capital to ensure the most effective transformation of the power sector. As a critical step towards this, the board has appointed Noel Zamot, the board’s current revitalization coordinator, as the chief transformation officer of Prepa, in accordance with its authority under Title III of PROMESA.

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“The Title III court set a hearing for November 13, 2017, to consider our motion. In bankruptcy proceedings, it is common practice for a debtor in possession to name a chief transformation officer, sometimes also referred to as a chief restructuring officer, to help turn around organizations and manage them while in bankruptcy. This is no different, but certainly more urgent,” she said.

(Screen capture of www.naturalresources.house.gov)

Upon confirmation by the court, Zamot’s task will be to lead the transformation of Prepa and the electric power sector following the devastation of Hurricane María. His immediate priority will be to fast-track reconstruction efforts on the island in coordination with the board and the  commonwealth and federal governments.

“The appointment of Noel is an essential step in achieving the goal of providing Puerto Rico residents and businesses reliable, resilient and reasonably priced electricity supply, which will also require attracting the private capital we need to revitalize the power sector. Our vision for the future of Puerto Rico’s energy sector is simple: a more modern, efficient and resilient power sector to revitalize the economy and deliver a better future for the people of Puerto Rico,” she said.

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