Puerto Rico electric utility union argues for independent inspector
Instead of receiver requested by bond insurers
SAN JUAN – The Puerto Rico Electric Power Authority (Prepa) workers union came out Friday against a request by some of the utility’s insurers for the appointment of a receiver to manage the public corporation but proposed the appointment of an “Independent Private Sector Inspector General (IPSIG).”
The Irrigation and Electric Workers Union, known as Utier for its Spanish acronym, said the IPSIG, as a third-party inspector, would ensure compliance with the law, deter unethical behavior and determine adequate protection for the insurers.
In objecting a receiver for the utility–a request by National Public Finance Guarantee Corp., Assured Guaranty Corp., Assured Guaranty Municipal Corp. and Syncora Guarantee Inc.–the union argued that the appointment of the independent inspector would be less drastic than a receiver and would protect the interests of all stakeholders.
In July 2017, Prepa’s insurers filed a motion seeking a lift from the stay on litigation established by the Puerto Rico Oversight, Management, and Economic Stability Act (Promesa) to obtain a receiver for Prepa, which is currently in bankruptcy to restructure its $9 billion debt. On Sept. 14, 2017, the U.S. District Court denied the request but the ruling was overturned by the U.S. First Circuit Court of Appeals, which remanded the case for further proceedings. The insurers filed an updated request in October 2018.
The monoline insurers want to seek the appointment of a receiver that would manage Prepa with the objective of reducing waste and inefficiency and generating revenue; enable the utility to provide reliable service; and complete its planned privatization.
“It is UTIER’s position that this Court should deny the Receiver Motion and instead, appoint an IPSIG. The IPSIG is a third-party from the private sector that ensures compliance with relevant law and deters, prevents, uncovers, and reports unethical and illegal conduct by, within, and against the organization; in this case PREPA. An IPSIG is a less intrusive and adversarial alternative to Movants’ proposal to start a parallel litigation in another court to effectively remove PREPA’s appointed officials and replace them with a Receiver…. An IPSIG should be considered to answer the question of: what, if any, adequate protection PREPA can offer short of a Receiver being appointed to manage it if protection is warranted,” the union said.
Utier is the second group objecting a receiver for the utility. This week, the Unsecured Creditors’ Committee objected a receivership for Prepa because it does not believe the bond insurers’ argument that bondholders have a lien over Prepa’s revenue.