Saturday, October 19, 2019

Senate Questions Donahue About Work in Prepa

By on October 5, 2016

SAN JUAN—The chief restructuring officer of the Puerto Rico Electric Power Authority (Prepa), Lisa Donahue, confirmed on Tuesday rumors that the Security and Exchanges Commission (SEC), a U.S. federal agency in charge of enforcing federal securities laws, is in the midst of investigating two bond issues made by the public corporation.

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Lisa Donahue, chief restructuring officer of the Puerto Rico Electric Power Authority (CB/Agustin Criollo)

Donahue confirmed the existence of an investigation during public hearings held by the Senate Committee on Energy and Water Resources to identify the causes of the September 21 blackout that left nearly 1.5 million subscribers without electric power.

When questioned by Senate President Eduardo Bhatia to shed light on the whereabouts of more than $3 billion in bonds issued by Prepa between 2010 and 2013, the official candidly accepted that the SEC has requested information concerning these issues. However, she acknowledged that she has not yet identified the money’s whereabouts.

“My job involves working with the liquidity crisis and stabilize the utility. We did not do any forensic exercise to go back and track the money that was received in the time before my intervention in Prepa […] the SEC is looking at the issue and I know that Prepa is cooperating with them and delivering documents on bond issues from 2013 and 2014, and I think that they will then determine if there was any violation of regulations,” said Donahue.

She also categorically denied that the measures implemented to restore liquidity to the public corporation had anything to do with the nearly four-day blackout.

“We did not recommend any austerity measure. There is no austerity measure imposed in Prepa at this time. Any savings have been generated through [revised] contracts, cash [influx], preventive maintenance, [and] negotiations with creditors to access previously restricted accounts so that we could bring funds to work with the infrastructure. For me, austerity means holding back [on cash expenditures] and laying off workers. We have been very careful to ensure that none of the recommendations regarding flexibility had nothing to do with layoffs, ” she said.

“The savings we have achieved [mostly have to do with] training and succession plans. Preventive maintenance, on the other hand, seeks to address situations before they become outright problems. Cash [influx] is carried out by collecting cash accounts, billing more effectively and minimizing energy theft. [Meanwhile], fuel savings have to do with savings that have been previously negotiated with suppliers and achieving better terms of credit, ” she added.

On the problem of communication between the public corporation and its customers, Donahue acknowledged that so far, the utility has not worked diligently to provide information to the public.

“I recognize that we have not done a good job in the aspect of communicating all the changes that were happening in Prepa to the public. It is impossible to refute any news that arise when certain people make allegations,” she said.

Although she made clear on several occasions that her field of expertise is in finance and not engineering, Donahue explained that one of the reasons for the delay in the recovery time of the distribution system is the very reality of being a utility based on an island.

“There have been blackouts in other jurisdictions in which I have worked, but they have recovered quickly because utilities based in the U.S. mainland have the ability to connect to a network in case of a massive power outage to restore service within a reasonable time. The difference is that Prepa is a utility on an island and is thus fully autonomous and isolated,” she said.

Regarding Prepa’s fiscal situation, Donahue said that bringing the public corporation forward would require $2.5 billion in infrastructure improvements.

“We require capital to invest in energy transmission infrastructure [and] invest in [more effective] generation facilities. And this has been established in the capital improvements program that we have prepared. That would require an investment of approximately $2.5 billion over the next ten years, which would include an investment in the [Aguirre Gasport] that the Puerto Rico Energy Commission did not want to approve. At present, Prepa does not have that capital,” she said.

“There are a couple of solutions that can be applied. Our plan was to try to get that capital across multiple areas. Number one, through concessions in the agreement with bondholders. Number two, through savings in cash generation that Prepa itself has done. Number three is to achieve a competitive request for proposal to establish whether an alternative mode of investment could be safer and faster,” she added.

After leaving the hearing, the Senate president said they were satisfied with Donahue’s presentation, although he added that Donahue’s statements revealed that Prepa still has a long way to go walking in terms of restructuring. Bhatia also criticized the delay in the work of restructuring that Donahue is spearheading.

“It is unacceptable that it is taking so long. If they say that they will take out requests for external entities to come help them, well, get on with it already. There is not much going on and I believe it causes a lot of frustration, and it obviously still surprises us all that the debt has not been audited yet. How is it possible that have not audited if that was the first thing they had to do? ” he asked.

]”This is not a trial, and I do not want it to be. We are listening. If there’s anyone else who wants to come to testify, let them come and say so. The committee’s technical personal will now study all evaluations were made today and, on that basis, will make recommendations that we will communicate to the people, “he said.

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