Puerto Rico’s power utility seeks to ensure fuel supply
SAN JUAN — The Puerto Rico Electric Power Authority (Prepa), which filed for bankruptcy protection last week, asked the court to authorize it to assume an extension to its fuel supply contract with Freepoint Commodities, its largest fuel supplier.
According to the motion submitted July 2 by counsel to the island’s financial control board—which represents the utility in the Promesa’s Title III bankruptcy process—the contract is essential for Prepa to maintain powerplants operating.
On April 10, the utility and Freepoint agreed to amend the contract, extending its termination from October 2017 to October 2018. As part of the agreement, Prepa had to immediately ask the court to authorize the contract if the utility commenced a bankruptcy process under Title III of Promesa.
“The amendment ultimately provides Prepa a reasonable runway to operate while it proceeds through this Title III Case, and ensured a reliable and continuous source of fuel that might not be otherwise readily available in the context of a pending Title III,” Prepa stated.
The motion stresses that if federal Judge Laura Taylor Swain fails to grant the authorization within 40 days of Prepa’s Title III case commencement, Freepoint could seek to terminate the contract or impose worse payment terms.
Furthermore, Prepa also said it has engaged in periodic negotiations with labor unions, negotiated certain modifications to existing power purchase contracts, negotiated potential modifications to other supply contracts, and has had discussions with the developer of the proposed Aguirre OffShore Gasport. “Such negotiations and discussions are ongoing,” the utility added.
Prepa’s contract with Freepoint, initially signed in 2015, was the target of an ethics probe because of Stone Point Capital’s investments in both Freepoint and Millstein & Co., which was then advising the Puerto Rico government on its debt-restructuring efforts and conducting negotiations with creditors.
The power utility’s Title III filing lists Freepoint as one of its top 20 unsecured creditors, with a $60 million claim.