Stakeholders question Puerto Rico port’s public-private partnership

An aerial view of San Juan Bay’s cruiseship and cargo ports three days after Hurricane María struck Puerto Rico, Sept. 24, 2017. (CB photo)

Cruise association head, travel industry rep call for transparency

Editor’s note: See page 4 of the Sept. 5 issue of Caribbean Business for the full report.

SAN JUAN — The company that won the concession for the cruiseship piers at the San Juan ports is expected to be announced any day now, but the founder of travel agency Cruceros To Go, Daphne Barbeito, said that for many members of the visitor’s economy, important questions remain unanswered. 

“This privatization [of the piers] wrongly managed, without the due protection on the part of the operational services that are provided locally, is going to have dire consequences from the porter and artisans, to the travel agents and the Old San Juan merchants,” said Barbeito, the former chairwoman of the American Society of Travel Agents, Puerto Rico and U.S. Virgin Islands Chapter, and member of the Puerto Rico Hotel and Tourism Association board as well as of the Confederation of Tourism Organizations in Latin America.

“This is going to have an [enormous] impact, and no one knows what is in the document,” she added.

Barbeito argued that the first problem she sees is a lack of transparency. This includes not being able to see the request for proposals issued by the Public-Private Partnerships Authority (PPPA), and the Tourism Co. (PRTC) not meeting with travel agents, cruise lines, Old San Juan business owners or tour operators.

Barbeito’s grievances are similar to those of the Florida-Caribbean Cruise Association president, Michele Paige.

“Last year, the Government of Puerto Rico initiated a public private partnership procurement (PPP) process for the redevelopment and operation of the San Juan cruise piers. The FCCA welcomes the government’s initiative to both improve and grow the cruise facilities in San Juan to ensure competitiveness in the market; however, the FCCA finds it unfortunate that the PPP process has seemingly completely bypassed cruise lines’ participation on the design of future port improvements, despite cruise lines’ port development and operations experience,” said Paige, who heads the organization that represents the cruiselines that roam the Caribbean.

Members of the tourism industry were only shown the request for qualifications, which Barbeito said left important information out. She would like answers on who is going to serve as intermediary for the cruiselines and how prices would be affected, and stressed that changes, especially in the competitive Caribbean market, could impact the number of cruiseships that dock in San Juan. 

“This is a fact. The first ones that are going to be affected are the transit [cruises]. As we know, transit is very flexible,” Barbeito said. “The transit side is going to have an immediate effect. The homeporting side is going to take a bit more time because the schedule is done two years prior and entails other logistics. [Changes in] homeport are going to take longer but, without a doubt, it is going to see and impact,” Barbeito said.

For her part, Paige struck a more conciliatory tone, and argued that there was still time to seek the cruiselines’ input and integrated it in the P3 process. 

“The FCCA does have a long-standing and close relationship with Government and Authorities in Puerto Rico, and our Member Lines, which represent the vast majority of the cruise traffic in San Juan, are interested in not only maintaining the level of business in San Juan, but also are exploring avenues for growth in deployments,” the FCCA president said.

She added, “To ensure the cruise lines are able to continue calling successfully and growing in Puerto Rico, it is vital that they have from the Port Authority and new Port Operator a continued direct channel of communication with Government to communicate cruise lines’ port infrastructure requirements and the requirements to promote a better guest experience, a guarantee with the stability and reliability in future port fees including freedom to select service providers, proper maintenance of the cruise facilities, and the safe and efficient movement of cruise guests around the destination.”

As a travel agency owner, Barbeito also focused on her industry and assured changes would impact the about 200 agencies certified in Puerto Rico. She argued that beyond tourism-related business, the concession could adversely affect the quality of visitors’ experience. 

Central to the concern is the possibility that the awardee to manage piers 1,3 and 4 and 11-14 would contract a tour operator that would then have a monopoly, a problem the San Juan ports has had in the past. Also, tourism stakeholders fear changes to the port’s infrastructure that could dissuade tourists from venturing outside the pier area. As an example, Barbeito mentioned ports that are arranged like shopping malls, with stores and restaurants, rather than encouraging tourists to explore the destination. 

When questioning the soundness of privatizing the San Juan piers to pay for Port Authority debt, Barbeito mentioned the failed privatization of the Mayagüez ports, which had to be reversed.




Public-private partnership aimed at stemming Puerto Rico utility’s vast water loss

Prasa Executive President Elí Díaz Atienza (CB file)

Companies vie to install $400 million smart-meter system

SAN JUAN — The Puerto Rico Aqueduct & Sewer Authority (Prasa) is studying public-private partnership (P3) proposals for a $400 million smart meter system aimed at diminishing the utility’s prodigious loss of water due to leakage and theft.

The public utility issued an invitation for bids on the project in April and three companies responded, Prasa Executive President Elí Díaz Atienza told Caribbean Business. He said “some” of the P3 proposals involve consortiums with local companies.

“We are evaluating these proposals and we should have this up and running during the first or second quarter of 2020,” he said, declining to give more details due to bidding confidentiality issues. The company awarded with the P3 contract would run with the costs of installation and would profit from the “new income” received as a result of the water saved, he said.

The proposed metering system would involve the use of advanced metering infrastructure (AMI) and automatic meter reading devices (AMR), Díaz said.

The plan calls for the replacement of all mechanical water meters in Puerto Rico with digital meters with a useful life of up to 20 years, he said, noting that mechanical meters become obsolete after five years. Prasa has 1.24 million customers, of which 95% are residential.

The AMI would rely on antenna communication to relay real-time information on water use patterns between Prasa and its customers, while the AMRs would utilize the same antenna communication for drive-by readings of the meters whose information will be stored digitally, Díaz explained.

Prasa loses almost three-fifths, or 59%, of the water it distributes to customers due to leakages and illegal hookups, according to the utility’s last revised fiscal plan report issued in June, which notes that such losses amount to about 299 million gallons a day. Of the 507 million gallons of water produced and distributed daily by the utility, 250 million gallons, or 49%, are lost to pipe ruptures and leakages, and 42 million gallons daily, or 8%, are lost to unauthorized water consumption, inaccurate consumption estimates, and water tank overflows, according to the report.

The proposed P3 aims to bring that figure down to single digits with technology, Díaz said, noting the success of the smart metering system installed in Madrid, Spain. This infrastructure will involve the implementation of so-called district metering, with digital meters and water pressure-measuring sensors placed at key points in the system, he said.

“We have no problems with visible pipe ruptures, which are quickly reported. The problem we have is with leakage involving pipes that are underground. This technology will detect these hidden pipe ruptures to quickly fix the problem,” Díaz said, noting that software would be used to analyze water pressure patters to detect these leakages as well as the unauthorized use of water.

The proposed meters would not only monitor water use but also store information on water-use patterns at a home or business. The advanced metering infrastructure would provide Prasa customers as well as the utility with remotely transmitted, real-time information on water use.

“For example, the day you fill the pool, you will know how much water you used doing that. You will be able to follow your daily consumption of water in your account,” the Prasa chief said, noting that customers could have access to an application with which they could track consumption at certain times of the day.

“This technology could be more difficult to implement in some rural areas, but meter readers would be continued to be used there. The problem we have with the loss of water, commercial as well as residential, is that we don’t know where this water is being lost,” Díaz said. “If 100 gallons are sent through a pipe, but only 80 gallons are being charged, then I know that 20 gallons are either lost through leakage or someone is stealing the water. This information is critical to know leakages due to pipe ruptures that are either visible or are not visible because the pipes are underground.”

The utility currently employs 200 meter-reading workers, he said, adding that the utility would need fewer employees with the new system, the number of which will be determined based on the proposal approved.

“Some employees are going to be absorbed by the private company and others will be reassigned to other functions,” he said.

—See related story on page 8 of this week’s Caribbean Business in print.




Promesa Watch: Consumer Rep Warns of Challenges in New Puerto Rico Energy Public Policy

Prepa headquarters in San Juan (File)

Prepa IRP’s Payment $9 Billion Debt, Pension Plan Adds 6.2 cents per kWh to Consumers’ Utility Rate Over 10 Years

Editor’s note: The following was first published in the April 18-24, 2019, issue of Caribbean Business.

The consumer representative on the Puerto Rico Electric Power Authority (Prepa) Board of Directors, Tomás Torres Placa, applauded the new energy public policy being converted into law but warned about challenges in its implementation.

“The project is historic and positive for Puerto Rico,” he said. “Now, the challenge is implementation, and everything should be for the benefit of the consumer,” he said.

Torres Placa is referring to Prepa’s Integrated Resource Plan (IRP), which presents various portfolios and scenarios to provide electricity to consumers in the future, projects that payment of the $9 billion debt and pension plan will add 6.2 cents to consumers’ utility rate over 10 years.

The new energy policy establishes as a goal that utility rates will be less than 20 cents per kilowatt-hour (kWh).

The IRP, which is being reviewed by the P.R. Energy Bureau, which had rejected it before for being defective, establishes that there is a component in the tariff that Prepa cannot ignore. This component reflects the charges for inherited liabilities, such as pensions and debt. The amount included is about 3 cents per kWh to pay for the debt and 2 cents per kWh to serve pension funds, which translates with increments to 6.2 cents per kWh. “This component is static and does not change with the portfolio’s asset mix,” the plan reads.

Torres said the 6.2-cent increase projected in the IRP and pension plan, which is to be added to the current rate, cannot come exclusively from the pocket of the 1.5 million Prepa consumers.

“That would raise energy costs in such a way that even if savings of about 3 cents per kWh is achieved, the rate would increase to 25 cents per kWh. Alternatives should be sought to help pay some of this debt value and not fall exclusively on consumers,” Torres said. “Therefore, once the debt is restructured, we must look for other ways to pay it,” he added.

Torres said the adjustment in the basic rate that would take effect May 1 is not “important” because, in the end, the adjustment would be about 0.3 cents per kWh for the consumer.

The new law provides for the modernization of the energy grid to develop an intelligent and flexible system that can integrate new technology and renewable energy. It establishes a timeline for implementation of renewable energy on the island: the elimination of 20 percent of fossil fuel use by 2022; 40 percent by 2025; and 60 percent by 2040. By 2050, the island should be using only renewable energy sources.

The law orders Prepa to transfer its power generation assets through their sale or via public-private partnerships (P3s). It also points out that no company can own more than 50 percent of those assets.

The contractors that acquire or operate Prepa’s powerplants must modernize or replace them with efficient plants within five years.

Likewise, the new plants established during the transition to 100 percent renewable energy will have to be smaller-scale.

The plants must also have the capacity to operate with multiple fuels that minimize greenhouse-gas emissions, with more modern technology and higher efficiency, and with the capacity to integrate distributed generation and renewable electric power.

The law also establishes the transfer of the operation and maintenance of the transmission & distribution (T&D) of energy to a P3 concessionaire by Dec. 31.

Asked how he plans to guarantee reasonable rates under the proposed privatization model, Gov. Ricardo Rosselló said contracts under P3s would be monitored.

Prepa CEO José Ortiz Vázquez said: “The low cost of solar energy and battery systems will make the implementation of this law possible, providing many options to consumers and making the energy grid more resilient.”

The new law promotes the distribution of renewable energy by establishing retail net metering for participants in the Net Measurement Program, under which customers with eligible renewable energy-generation systems can export their excess energy to Prepa’s network.

The utility will measure the energy that customers export to the network and invoice them for their net energy consumed. Net energy is equal to the energy consumed by the customer minus the energy exported to the grid.

The law also strengthens the Energy Bureau as the regulatory entity in charge of executing the implementation of the public energy policy.

The bureau’s budget will be increased to $20 million. It will be granted greater operational autonomy and given new powers to regulate through mechanisms based on performance metrics. The measure also creates a Green Energy Trust that will promote consumers becoming consumer-suppliers.

If a customer exports more energy than they consume from Prepa, the excess will be posted to their account so it can be used in subsequent months.

Through the Net Measurement Program, the network operator will compensate the consumer-provider for the energy they export to the network at the same kWh rate at which they purchase the energy.




Companies begin to vie for Puerto Rico utility grid’s concession  

SAN JUAN – Gov. Ricardo Rosselló announced Thursday that the Public-Private Partnerships Authority (P3A) has received documents from five private proponents interested in managing and operating the Puerto Rico Electric Power Authority’s (Prepa) transmission and distribution system in a public-private partnership.

The P3A will evaluate the responses to its request for qualifications and identify which companies meet the minimum requirements “to carry out the transformation and modernization of the energy system of Puerto Rico,” according to the governor’s office press release.

“We promised to end the useless monopoly of PREPA that held our people and our economy hostage. The process of energy transformation that we are implementing requires investment of funds and resources that PREPA does not have. The process of energy transformation that we are implementing requires the investment of funds and resources that PREPA does not have,” the governor said. “The goal is to have a world-class system that is resilient and efficient. Today, the private and specialized sector shows that they trust what we are doing and that they are willing to invest on the Island.”

Once the companies that “prequalified” are identified, a comment period for each of their proposals will be established.

“Our administration remains firm in its commitment to provide greater stability, reliability, and efficiency to the energy system of Puerto Rico. Today we take another step forward in the route to the transformation of our energy system,” Rosselló said.

The proponents submitted their qualifications before the deadline, which expired, Wednesday, and include regulated, world-class energy companies.”

With “the purpose of continuing to promote this project successfully, the executive director of the P3A, Omar J. Marrero; the executive director of the Fiscal Agency and Financial Advisory Authority of Puerto Rico (AAFAF), Christian Sobrino Vega; and the Puerto Rico Energy Bureau (PREB) signed a collaboration agreement, whose purpose is to facilitate the implementation of public energy policy.

“Specifically, what is sought is to facilitate transactions for the sale, disposal or transfer of the assets, operations, functions and services of PREPA through the [P3] mechanism.

“Said collaboration agreement was granted in compliance with Act No. 120-2018, which provides the legal framework for the privatization of PREPA.

“This interagency agreement contains the terms and conditions that will allow the P3A to share information and important documents related to such PREPA transactions with the PREB; and will allow the Bureau to provide technical, expert, financial and human resource assistance to the P3A,” the release reads.

“We signed this collaboration agreement, in compliance with the responsibilities assigned to our agencies, to be able to exchange confidential information and ensure that communication flows in an agile and transparent manner, and that transactions are consummated effectively,” Sobrino Vega said.

“At the P3 Authority we have the legal framework and the experience to carry out complex transactions and, on the other hand, our PREB colleagues have technical expertise in energy. Therefore, we understand that, by combining these skills, we will be able to work more effectively,” Marrero added.

For more information on public-private partnership projects, visit http://www.p3.pr.gov.




Numerous Gaps in Puerto Rico Proposed Energy Policy

Puerto Rico Electric Power Authority headquarters in San Juan (File)

Editor’s note: The following originally appeared in the Nov. 1-7, 2018, issue of Caribbean Business.

Senate Bill 1121, the most important energy policy measure in decades, will fail to spur an accessible, efficient and reliant power industry and deters integration of renewables, according to critics and supporters.

Among the legislation’s core shortcomings is that it fails to include the Energy Bureau in the process of privatizing the Puerto Rico Electric Power Authority (Prepa). This process would be conducted through public-private partnership (P3) laws, which may prevent public participation in the process. The bill would also allow Prepa or its successor to impose charges on customers who use renewable energy to offset the cost of power drawn from the utility (net metering).

Puerto Rico’s Public Energy Policy proposes a transition to 100 percent renewables by 2050. The bill would eliminate Prepa’s monopoly held for decades by allowing the sale of Prepa’s powerplants while placing the transmission and distribution systems under a private concessionaire. That strategy would begin to shift the power grid from its reliance on oil toward renewables.

Overseeing the energy sector is the Energy Bureau, which ensures private power companies not only improve the infrastructure but allow for new generating systems such as “microgrids,” which would permit clusters of customers to disconnect from Prepa if a storm hits and generate power on their own. The legislation would also establish energy-saving requirements for all agencies.

The issue of transparency and participation in Prepa’s sale is also important for some groups.

Puerto Rico Manufacturers Association President Rodrigo Masses, who backed the bill, noted that the process of privatizing Prepa has to be transparent and guarantee public participation to “ensure there are no surprises.” The legislation does not contain wording to ensure an open process under the P3 law. “While this bill imposes time limitations [on completing] partnership contracts, we believe there has to be citizen participation,” he said.

On the other hand, Luis Alonso Vega, coordinator of the Puerto Rico Coalition for Energy Cooperation, said that although public policy measure has yet to be signed into law, Prepa and the P.R. Public-Private Partnerships Authority (P3A) have already identified investors and companies interested in establishing powerplants that burn gas and in taking over the transmission and distribution systems. “The big business interests already have walked part of the road and rely on support from officials. They have the resources to bid for and win contracts in an open process and for months have been writing their proposals,” he said.

Ángel Figueroa Jaramillo, president of Prepa’s Irrigation & Electrical Workers Union (known as Utier by its Spanish acronym), said the P3A is already negotiating contracts for power generation, including powerplants that run on natural gas in Yabucoa and Cataño, even though there is no energy policy yet. Figueroa Jaramillo said the bill does not tackle the privatization of the power utility’s customer service area. Jaramillo, like other groups such as the Sierra Club, opposes Prepa’s privatization, noting that the bill does not protect workers’ acquired labor rights when many are leaving the power utility. The legislation says Prepa must keep the required number of “needed workers” to implement the P3A contract instead of helping workers make the transition to a renewable energy economy.

The Sierra Club’s Adrianna González said the bill calls for privatization contracts to maximize the use of federal financing. She warned that federal funds are being used to help rebuild the island and should not be used to subsidize corporations but to help sectors that need the incentives, such as communities that wish to set up solar grids.

The Fiscal Agency & Financial Advisory Authority (Fafaa, or Aafaf by its Spanish acronym) suggested certain regulatory instruments that the Energy Bureau would need to regulate private energy operators, including certificates of convenience & necessity, wholesale energy sale regulations, rate processes that allow for additional charges and mechanisms to tackle costs that could impact low-income consumers.

“There are provisions regarding Prepa’s privatization that could be problematic,” said Fafaa Director Christian Sobrino. He noted that Prepa requires separate internal accounting for each asset and function before the transaction can be eliminated. He objected to a provision in the bill that says the P3 for the electrical system’s transmission and distribution system must be completed by Dec. 19. “The provision requiring that 10 percent of the payment for all transactions is sent to a Green Fund could hinder the Title III bankruptcy process,” he said. Prepa is currently in bankruptcy to restructure its $9 billion debt.

While on the one hand, the bill would implement the concept of “prosumers,” it also would allow the utility to impose charges on net metering (NEM) customers, who will also have to pay the costs for installing renewable energy equipment.

“Punishing net metering clients, punishing prosumers with NEM-specific charges is a tactic that renewable energy opposes,” said Javier Rua Jovet on behalf of Sunrun Inc. The organization also said the legislation fails to include language that would forbid unreasonable and arbitrary interconnections and net metering delays for small systems, or those of less than 25 kilowatts, as currently happens.

Jeramfel Lozada Ramírez, vice president of the P.R. Renewable Energy Contractors & Consultants Association (Aconer by its Spanish acronym), asked that small renewable energy systems be exempted from the permitting process. Lozada Ramírez said the Energy Bureau should be required to examine the justification of any net metering charge because it would hinder the use of renewables.

Jesús García Oyola, an Arecibo resident, complained that the bill will allow the construction of a waste-to-energy plant in that town because incinerators are included in the definition of renewables.




Puerto Rico gov’t releases shortlists for 3 public-private partnership projects

SAN JUAN – Thirteen consortia were shortlisted in the procurement process for two priority projects and one unsolicited project under the public-private partnership (P3) mechanism, the Puerto Rico government said Friday.

Omar J. Marrero, the executive director of the Puerto Rico Public-Private Partnerships Authority (P3A), announced that the three projects are: the optimization of the Puerto Rico Aqueduct and Sewer Authority’s (Prasa) “metering system and customer experience”; the “transformation of the maritime transportation system” for the ferry service routes between Ceiba and the island-municipalities of Culebra and Vieques, and between San Juan and Cataño, and an “energy storage system” project.

Marrero said the projects went through the required evaluation process.

“After carefully evaluating the proponents, we have selected the candidates that are better qualified to develop these projects. We are very pleased with the renowned consortia that are moving forward in the procurement process given their reputation and their proven level of experience,” Marrero said.

The Prasa metering system and customer service project, which consists of improving efficiency and replacing meters, received responses to the request for qualifications (RFQ) from five proponents, four of which were shortlisted and, on Wednesday, Sept.r 26, were invited to submit their specific proposals. These proponents are BLU WATER Consortium, IBT Group Team, Puerto Rico Advanced Intelligent Metering Services (AIMS), and SUEZ Group.

As for the project that seeks alternatives to provide transportation service currently provided by the Maritime Transportation Authority to the island-municipalities of Vieques and Culebra and between Cataño and San Juan, responses to the RFQ were received from five proponents: Balearia Caribbean Inc., HMS Ferries Inc., Priority Roro Services Inc., Puerto Rico Fast Ferries LLC, and Seastreak LLC.

Meanwhile, for the energy storage project, which will consist of the development and installation of storage systems in several critical substations of the Puerto Rico Electric Power Authority, out of 11 proponents, AES Puerto Rico L.P. and Fluence Energy LLC., Invenergy Storage Development LLC, PowerSecure Inc., and Tesla Inc. were shortlisted.

“We are working on these high impact projects as part of the P3 agenda whose main objective is to transform and revive Puerto Rico’s economy. These P3 projects further the development of infrastructure and are key to continue promoting the economic growth of our island. We are focused and working harder than ever on this objective as it is one of the premises established by Governor Ricardo Rosselló. Puerto Rico is generating unique opportunities as reflected by the market’s interest in the island,” Marrero added.

In addition, the P3A intends to issue requests for proposals in October, inviting the shortlisted consortia to submit specific proposals for the energy storage system and the transformation of the ferry system for the island municipalities, Cataño and San Juan.

More information on these projects is available in the P3A’s website.




P3 Project for San Juan Cruise Port Conjures Airport Deal

Editor’s note: The following originally appeared in the Sept. 20, 2018, issue of Caribbean Business.

A public-private partnership (P3) for 20 to 30 years via $360 million to $500 million in private capital investment and management continuity under a master plan are some of the key points that would make up a Puerto Rico Public-Private Partnerships Authority (P3A) project that seeks to position the island as the lead player in the Caribbean’s cruiseship industry.

The Puerto Rico Ports Authority is struggling to maintain and improve the island’s airports and seaports due to deteriorating finances. Multiple owners and operators for other port facilities and a lack of coordination between ports are direct contributors to deep-seated issues that Director Anthony Maceira intends to address with the development of this project.

“We are going to transfer to private hands the operation and maintenance of some assets that right now are in a decrepit state, and after 20 to 30 years, we will receive them in a much better state. The vision is, in that period, that a solid cruise industry would have developed in Puerto Rico,” said the ports chief, who was emphatic in comparing this concession with the P3 model used in 2013, when a contract was granted to Aerostar Holdings LLC to operate the Luis Muñoz Marín International Airport until 2043.

The cruise industry is the fastest-growing leisure travel market in recent years. The Caribbean market comprises about 35 percent of the total, or more than 10 million passengers a year. “At its best moment, Puerto Rico serves 1.4 million passengers, and what the governor wants is for the island to be the leader in that market throughout the Caribbean,” explained Maceira, who took out his cellphone to read an email from a cruiseline executive.

“The CEO of a cruise company writes to me, ‘I am following up and letting you know that we’re looking forward to this process,’ and this is one who even submitted a letter favoring the P3 process because it is one of the cruiselines that right now can’t bring their vessels to San Juan,” Maceira said, adding Norwegian Cruise Lines as an example, as the company has expressed interest in docking its largest ship on the island, which doesn’t have a suitable dock for it.

Eight companies participated in the government’s market-sounding, which revealed that the industry would require more time for the request for qualifications (RFQs) because the project encompasses a substantial injection of private capital. Ports expects that at least four of these will participate in the RFQ. The names of these companies cannot be published due to the confidentiality of the process, but Maceira told Caribbean Business about the type of business they conduct.

“We cannot say the names but the company that submitted the unsolicited proposal is public knowledge—Global Ports Holdings. I can tell you that there is a bit of everything—there are [U.S.] American, European companies, with physical presence in Asia; port operators, cruiselines. There is a variety and that’s what we’re looking for, that there is healthy, but very strong competition,” Maceira said.

Does a P3 benefit Puerto Rico?

As part of the agreement with Aerostar, Ports received a $615 million payment in 2013. Until 2018, the corporation invoiced a fixed $2.5 million a year, with increases as dictated by the consumer price index. Starting next year, the payment will amount to 5 percent of the gross earnings of the airport operator, a figure that continues until 2033, when the total goes to 10 percent until the termination of the 40-year agreement in 2043.

Ports expects to benefit monetarily from this business, which seeks long-term rent of piers 1, 3, 4, 11, 12, 13, 14, the Pan-American docks and the pedestrian promenade between docks in the southern area of Old San Juan via fixed-fee and variable-revenue fee models based on the gross income of the project manager, an advance or a combination of these, as was the case for the Muñoz Marín Airport partnership.

Despite claiming the transfer of the airport to Aerostar was good business, Maceira pointed out that one of the mistakes when assigning a value to the property was failing to “optimize” the value of its assets. In the case of the cruise ports, while it is true billions in federal aid are expected to help rebuild them, it is not a mistake to push a P3 of this magnitude.

“At the moment, we are working on a legal process and mathematical formula so, once the federal funds begin to be received, the private entity may be able to function as a grant manager,” thus private investment is reduced and Ports’ income from the management concession of the piers and surrounding areas is greater, Maceira said.

“To better manage the maritime transportation system as a whole and make ports more attractive to maritime businesses and investors, maritime industry experts’ input indicates the need for consolidating ownership and oversight of the nine main ports,” read both the draft and final version of “Transformation & Innovation in the Wake of Devastation: An Economic & Disaster-Recovery Plan for Puerto Rico,” the document that seeks $906 million in federal funds to repair ports in San Juan, Peñuelas, Guánica and Fajardo.

Is there redundancy between the estimated private investment and the federal funds requested, Caribbean Business asked.

“The federal funds being requested are under section 428 of FEMA’s [Federal Emergency Management Agency’s] Hazard Mitigation [Grant Program]. Part of what the package allows is that money is assigned to recipients and subrecipients based on the shortened estimates between the federal government and local government, but the money can be moved. The authority [Ports] could decide to redirect this money to the airports because it got another way to finance the repair of the cruise ports, as long as it is for permanent work in compliance with FEMA parameters,” the Ports director explained.

“To ensure that backup capacity exists if the Port of San Juan is damaged, PRPA [Ports] and other port operators plan to further develop an existing seaport to provide redundant capacity through the use of public-private partnerships,” reads the final document submitted Aug. 8 and unanimously certified by the island’s fiscal oversight board 20 days later. The latter warned the administration of Gov. Ricardo Rosselló to avoid budgetary and implementation risks, in compliance with the Puerto Rico Oversight, Management & Economic Stability Act.




Gov’s rep to Puerto Rico fiscal board: Utility privatization bill won’t be withdrawn

By Génesis Ibarra and Eva Llorens

SAN JUAN – The representative of the governor to the fiscal oversight board, Christian Sobrino, denied Monday that the privatization bill of the Puerto Rico Electric Power Authority (Prepa) that is currently being considered by the Legislative Assembly will be withdrawn.

“Withdrawing the privatization bill of the Electric Power Authority has not been agreed to. Today we held a meeting with the legislative leadership to discuss the bill and technical and procedural questions regarding it. Any change that is necessary to clarify the bill will be worked on in the current legislative process,” Sobrino said in a statement.

GDB President Christian Sobrino, the governor’s representative to the fiscal oversight board for Puerto Rico (CB/Juan J. Rodríguez)

The official comment was issued after Senate President Thomas Rivera Schatz recently said the privatization bill will be worked on in conjunction with another that would establish the regulatory framework, a bill the administration of Gov. Ricardo Rosselló has yet to send to the Legislature.

On Monday, Senate Vice President Larry Seilhamer revealed that Senate Bill 860 will be amended to eliminate language that refers to privatization and keep only that on a public-private partnership (PPP) to transfer Prepa’s energy transmission and distribution (T&D) to a private company.

Economist: Puerto Rico utility’s privatization will raise electric bill

Although only one private company would control the public utility’s T&D–similar to the PPP with Aerostar Airport Holdings to operate Luis Muñoz Marín International Airport–Seilhamer said it would not be a monopoly because “the sale of [Prepa] assets is not included.”

The senator, who is also the chairman of the Special Committee on Energy Affairs also announced that the U.S. Department of Energy contracted the Southern States Energy Board–which is composed of governors and state legislators from 16 states, Puerto Rico and the U.S. Virgin Islands, as well as a presidential appointee–to draft along with the Rosselló administration the second bill that will contain the regulatory framework, the legal framework and the public energy policy.

The second bill “could be left for the next session, and I emphasize the time schedule given by the federal Department of Energy, which at the end of the day wants a reliable and resilient Puerto Rico electrical system,” Seilhamer said.

The Southern States Energy Board will have nine months to prepare the regulatory framework.

As currently written, the Prepa privatization bill has numerous critics who believe it could result in high energy costs.

Prof. José Alameda Lozada, an economist, conducted a study, commissioned by the Puerto Rico Electric Power Authority’s Irrigation & Electrical Workers Union (Utier by its Spanish acronym), in which he concluded, among other things, that contrary to what the government alleges, the public utility’s privatization would result in higher residential bills.

“On average, citizens would be paying on average $986 per year. Commercial customers would pay $13,600 more and industrial customers would spend $827,000 more per year,” Alameda said during a hearing last week held by the Joint Committee on Economic Development, Planning, Telecommunications, Public-Private Partnerships, Energy and Government of the House of Representatives.

Alameda also mentioned that the decrease in energy demand, whether due to newer electrical equipment using less power or the island’s population decline, does not help reduce the cost of generating electricity in Puerto Rico.




Hearings to privatize Puerto Rico power company begin

SAN JUAN – With the overwhelming endorsement of House Bill 1481 by various agency officials, hearings began Tuesday over a measure authored by the majority party to establish the legal parameters for public-private partnerships with the Puerto Rico Electric Power Authority (Prepa) and open up the island’s energy market.

After the Government Development Bank (GDB), the Fiscal Agency and Financial Advisory Authority (AAFAF), the Public-Private Partnerships Authority (AAPP) and the Justice Department supported the bill, everything seems to indicate that the sale of the public corporation is imminent.

The hearings were convened by the Puerto Rico House Economic Development, Planning, Telecommunications, Public-Private Partnerships & Energy Committee, chaired by Víctor Parés, and the Government Committee, chaired by Jorge Navarro.

Rep. Víctor Parés, chairman of the House Economic Development, Planning, Telecommunications, Public-Private Partnerships & Energy Committee (Courtesy photo)

“Puerto Rico’s electric power system collapsed. It no longer works, and with a corporation in bankruptcy,” Parés said at the beginning of the hearing, “I think we have the opportunity to change that and do it as a priority amid what we have faced and lived through with the passage of [Hurricane] Maria.”

The first witness called was Prepa Deputy Director Justo González, who praised the bill and assured it was is the right step toward strengthening the island’s grid.

“It will be possible to carry out the entire transformation of the energy system that is needed in Puerto Rico and it is consistent with the vision for the energy future that was recently adopted by Prepa’s Governing Board,” González said.

“With a new electric power system, losses are minimized. All this must be thought of for the benefit of the people of Puerto Rico,” he added.

The official further said the privatization of the utility, which according to the administration has an about $14 billion debt, would make it possible to leave the fragile economic situation in which it finds itself and offer Puerto Rico a new alternative to conduct business.

In addition, González indicated that the participatory public-private partnerships concept is key for the corporation’s recovery in the short and medium terms and indispensable for its long-term transformation.

Prepa Deputy Director Justo González (Courtesy photo)

Meanwhile, Justice Secretary Wanda Vázquez endorsed the draft proposal from the legal point of view and assured the bill establishes the legal framework to probe the market and open the call for companies interested in participating in the transformation of the electrical system.

“We recognize the need for this legislation to be approved in order to address the urgent need to provide better services to the public and that this can be realized without delays that affect the public interest,” Vázquez said.

Regarding the public utility’s employees, the Justice secretary stressed that during the transition process the rights acquired by Prepa employees will be guaranteed.

The government’s economic component, composed by the GDB, the AAFAF and the AAPP, presented its joint endorsement and said the legislation’s approval would be beneficial.

Omar Marrero, the executive director of AAPP, stressed “it is extremely important that Prepa transactions be carried out efficiently while ensuring transparency in the processes. The public-private partnership structure we are proposing allows for precisely that, insofar as it provides an efficient, competitive and open process that has already been proven successful in the past.”

Marrero further stated that the Puerto Rico energy industry will undergo significant changes as a result of the AEE Transactions.

“In all likelihood, they will require modifications to the regulatory framework. Partnership contracts awarded as results of Prepa transactions will be responsibly audited,” he said.

In response to questions from Parés about what specifically will be sold by the utility, the AAPP’s executive director said it would be the corporation’s power generation assets.

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However, following Marrero’s testimony, Popular Democratic Party minority Rep. Luis Vega Ramos denounced that the bill does not mention that the privatization of assets would be limited to those that produced electric power.

Meanwhile, the spokesman of the Puerto Rican Independence Party (PIP), Rep. Denis Márquez, said that he and the institution he represents have historically defended and maintain that Prepa should remain a public corporation.

In his turn to debate, Popular Democratic Party (PDP) Minority Spokesman Rafael “Tatito” Hernández stressed that “the element of transparency is important,” adding, “We can present bipartisan amendments to include a transparency mechanism.”

GDB and Aafaf Chairman Christian Sobrino replied to the lawmaker that “we are always available to the members of the committees to be able to fulfill the objectives of the bill.”

Bill that would consolidate Puerto Rico Energy Commission passed by House




Bill to privatize Puerto Rico utility eliminates provisions to prevent power rate hike

SAN JUAN – The Puerto Rico Electric Power Authority (Prepa), which has been widely criticized for its poor management historically, will be in charge of selling its own assets and facilities, a process that cannot be supervised or regulated by the Puerto Rico Energy Commission (PREC).

The public corporation may also permanently or temporarily transfer or delegate any of its operations under the framework provided by the Public-Private Partnerships Act of 2009, as long as not in conflict with the proposed legislation to privatize its facilities. The Energy Commission would also be prevented from intervening or regulating this type of contract.

That is what Senate Bill 860 would establish, with its sister bill in the House of Representatives (HB 1481) establishing the purchase of Prepa that was submitted to the Legislature on Tuesday.

Prepa’s Palo Seco power complex between the municipalities of Cataño and Toa Baja. (Felipe Torres/CB)

According to the proposed legislation, all Prepa property will be for sale, including its facilities, as well as generation and metering systems.

Any transaction the power company makes, whether it be a sale or transfer of operations through a public-private partnership, would not have to comply with the long-term integrated resources plan approved by PREC. That plan, among other things, establishes goals regarding the use of renewable energy.

Although the definition of a public-private partnership is used to refer to a contract in which a service is handed over to a private entity, under the proposed law it would be amended to include the process of selling electrical installations.

Prepa may establish a sale process under Article 6 of the Public-Private Partnerships Act, which establishes the creation and approval of regulation for the processes leading to the establishment of partnerships, including identifying the functions to be carried out under the alliance, as well as which candidate companies are chosen to request proposals from and their evaluation.

However, any transaction made by Prepa would not have to comply with Articles 6C, 7 and 10 of the Public-Private Partnerships Act, which prevent ownership of public facilities from being transferred to private hands, require desirability and convenience studies, and establish the content of a partnership contract.

Selling Puerto Rico’s electric power utility won’t be easy

The transactions Prepa undertakes related to its facilities would not have to comply with the requirement of an energy relief plan because the obligation to comply with that provision is eliminated.

Any transaction-related payment received by Prepa may be used to contribute to the utility’s employee retirement system to increase its capitalization.

Although the Energy Commission or its successor entity may not intervene with any transaction made with Prepa facilities, nor establish regulations for these, it may oversee the contractor’s performance under the partnership agreement as well as review the applicable rates after the transaction is completed.

The law nor the partnership or privatization contract cannot be used by the government to dismiss Prepa employees in regular positions. As for utility personnel who wish to remain employed by the government, they would be assigned in accordance with applicable statutes and retain their acquired rights. The government and Prepa, however, may offer voluntary transitions or voluntary resignation plans to those employees.



PC1481 TransformacióN De AEE (Text)