Prasa Revitalization Bill Faces Setback
SAN JUAN — Mere days after approving a bill that would allow the Puerto Rico Aqueduct & Sewer Authority (Prasa) to access external financing — and thus avoid an imminent water-rate hike — the island’s Senate is calling back the measure to reconsider its vote.
After months of going back and forth with the Prasa Revitalization Act, or House Bill 2786, both legislative chambers hashed out differences over the measure and finally approved it this week.
However, after both chambers struck a consensus over H.B. 2786’s language and approved it, “certain discrepancies remained,” thus the Senate’s decision to call back the measure, Popular Democratic Party Sen. Ramón Luis Nieves told Caribbean Business.
He added that the upper chamber will seek to address on Thursday the issue, which centers on the maximum amount of debt that Prasa is authorized to issue under the bill.
Nieves stressed that he sees no other issues with the bill, and that it still has support among a majority of lawmakers. During Thursday’s session, the Senate sent back the measure to conference committee.
The legislation would prevent Prasa from implementing water-rate hikes to its clients within the next three years, while allowing the utility to issue as much as $900 million in debt.
This would give Prasa the opportunity to pay its contractors, who are owed roughly $150 million, and restart its capital improvement program, which has come to a halt amid the utility’s inability to access capital markets. Prasa estimates it needs about $375 million to reignite its infrastructure program.
Following the P.R. Electric Power Authority’s footsteps, Prasa’s bill calls for a securitization mechanism, whereby a new corporation is created with the sole purpose of issuing new debt for the utility. This new debt would be backed by a portion of water bills Prasa’s clients receive each month.
The bill would also allow Prasa to restructure its roughly $4 billion in debt, although the utility would be required to meet a range of conditions in doing so. Moreover, H.B. 2786 calls on Prasa to reduce its water loss by 5%, a goal that must be reached by 2019.
Having extinguished all possibilities to achieve external financing to date, Prasa Executive President Alberto Lázaro has said that in addition to a water-rate hike, the only remaining option is the securitization bill.
“I think the market is waiting for this [bill], they already know this is coming,” Lázaro told Caribbean Business in February. While it can take up to four months to establish the mechanism following the bill’s enactment into law, it still puts the utility in a better position at achieving interim financing that allows it to meets its obligations without resorting to a water-rate hike, Prasa’s chief added at the time.