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Prasa Securitization Bill to be Voted on Thursday

By on March 7, 2016

SAN JUAN – Since more than 20 pages of amendments were introduced to the proposed Puerto Rico Aqueduct & Sewer Authority Revitalization bill, which would create a securitization mechanism to allow the utility to obtain much-needed external financing, the House opted to push the vote to Thursday’s session.

The announcement was made by House Speaker Jaime Perelló, who noted that the debate on the bill would last three hours.

Lawmakers were submitting amendments to House Bill 2786 until the last minute. Popular Democratic Party representatives Luis Vega Ramos and Luis Raúl Torres conditioned their vote to amendments that would guarantee there would not be rate hikes in three years. Prasa Alberto Lázaro, Prasa presidentExecutive Director Alberto Lázaro, who was in the House discussing the bill with lawmakers, accepted the amendments.

The proposed legislation is expected to allow Prasa to continue capital improvement projects and prevent a rate hike of more than $10, a scenario that officials said could take place as early as July.

Prasa’s last rate hike back in 2013 sought to cover operational costs, debt service until fiscal year 2018 and projected deficits during fiscal 2016 and 2017. Prasa intended to pay for capital improvement projects with external financing not with the utility’s revenue.

The constant media news of the island’s overall fiscal and economic crises has been the main reason for the utility’s failure to achieve the necessary financing at reasonable terms, resulting in a complete halt of its capital improvements plan.

What’s more, to pay roughly $90 million in short-term debt maturing on Feb. 29, Prasa would siphon its Rate Stabilization Fund — monies that were supposed to be used to cover projected deficits during fiscal 2016 and 2017.

Prasa has no access to capital markets and, as a result, more than 140 infrastructure projects worth about $600 million have been suspended, roughly $150 million is owed to suppliers and approximately 5,000 people have lost their jobs in the already battered private sector.

The legislation would create a corporation that will issue bonds to provide funding for capital improvements that would not exceed 20% of the charges billed by Prasa. The bonds will also be used to ease a huge portion of the utility’s $4.5 billion debt.

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