Thursday, October 21, 2021

Private Sector Asks Congress to Reject Prepa Agreement

By on March 21, 2017

SAN JUAN – Representatives from the Puerto Rico private sector have asked the chairman of the U.S. House subcommittee on Indian, Insular and Alaska Native Affairs, Doug LaMalfa, to reject the restructuring support agreement (RSA) between the Puerto Rico Electric Power Authority (Prepa) and its bondholders because it doesn’t benefit the public utility’s customers, thus resulting in bad business for everybody involved.

The RSA will be the focus during the subcommittee’s hearing next Wednesday, in which the Fiscal Oversight & Management Board will testify, among others. The Puerto Rico Energy Commission (PREC), which regulates Prepa, wasn’t cited for the congressional hearing, according to a list provided by the committee.

Entrance to the Puerto Rico Electric Power Authority in San Juan. (Yoel Parrilla/CB)

Puerto Rico Electric Power Authority headquarters in San Juan. (Yoel Parrilla/CB)

The associations that made the request were the Puerto Rico Manufacturers Association (AIPR by its Spanish acronym); the Puerto Rico Restaurants Association; the United Retailers Association; the Chamber of Food Marketing, Industry & Distribution; the Puerto Rico Builders Association; the Puerto Rico Renewable Energy Contractors & Consultants Association; the Puerto Rico Products Association; the Puerto Rico Hotel & Tourism Association; and the Puerto Rico Institute for Competitiveness and Sustainable Economy.

Most of these organizations challenged the PREC’s order on Prepa’s debt securitization in court. They explained to Congress that the RSA should be renegotiated by Puerto Rico’s government and the fiscal board with the bondholders, as established in the federal Promesa law, to prioritize economic growth and competitive energy rates, according to a press release published by the AIPR.

“[The RSA] is a punitive proposition for consumers and electricity ratepayers who will suffer higher rates under this agreement which preserves the government run PREPA monopoly while locking out private sector and alternative energy competition.  Even bondholders who will see the Puerto Rico electrical system unravel as Puerto Rico ratepayers are unable to comply with such costly requirements. The end result of these high electricity costs will be an even weaker economy, greater population losses, and less new investment in job creation,” they stated.

The private sector representatives urged Congress, Puerto Rico Gov. Ricardo Rosselló, and the Fiscal Oversight & Management Board to “move quickly” and establish a debt restructuring agreement in accordance to the board-certified fiscal plan for the island. The current RSA expires March 31.

Financial Board Says Prepa’s Fiscal Plan does not promote ‘aggressive transformation’

The plan provides about 26% of the debt value’s payment for all bondholders, which is consistent with the ability of consumers and taxpayers to pay for services. In addition, it offers an opportunity for economic growth and job creation, as well as a strategy to revert rapid population loss and Prepa’s customer base.

On the other hand, the proposed agreement guarantees about 85% of the payment to Prepa bondholders. “This disparity, is unfair, not only for electrical ratepayers but for every person and entity that decided to invest in Puerto Rico’s bonds, including coops, retirement funds, profit-sharing and mutual funds,” the private sector groups argue.

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