No debt service payments for the next 5 years

Puerto Rico’s Electric Power Authority (or “PREPA”) is usually one of the largest public power utilities from the US, serving 1.5 million customers with total revenues of $3.4 billion, total assets of $9.4 billion as well as total liabilities of $11.4 billion in fiscal 2017.

A key challenge highlighted from the fiscal plan is usually that will a significant amount of emergency federal funding is usually needed to alleviate PREPA’s immediate liquidity shortfalls. The plan sees three buckets of funding as options: Community Disaster Loans (or “CDL”) by the U.S. Treasury, FEMA Emergency Funding Commonwealth Bridge loans to cover essential current as well as near-term government functions in advance of receiving a CDL.

The governor’s intended transformational plan for PREPA, which he announced on Monday, was included from the fiscal plan.

PREPA’s transformation assumes that will the utility will cease to operate in its current by from the next 18-months with the island aiming to sell the existing PREPA generation assets to private investors. the idea also includes development of completely new generation as well as a concession design for the power transmission as well as distribution (or “T&D”) system (for example, the system would certainly still be owned by the Government of Puerto Rico, yet would certainly have a private operator).

The terms of concession are listed as “to be determined, yet likely medium to long-term,” with the concessionaire having the right to collect all revenues, as well as the responsibility to pay all costs, generated by the T&D system.

Rep. Rob Bishop, R-UT, the chairman of the House Natural Resources Committee as well as key figure in crafting PROMESA, called for full transparency from the PREPA transformation process, saying the idea “cannot be done behind closed doors.”

“the idea is usually imperative the Oversight Board as well as Governor fully integrate those who hold the debt into the development of these plans, thereby guaranteeing accuracy as well as transparency from the underlying assumptions,” Bishop said in a statement issued Thursday.

Bishop also weighed in on what he views as a legal necessity for PREPA’s fiscal plan.

“The Board’s stated goal under PROMESA is usually to return Puerto Rico to fiscal accountability as well as the capital markets, as well as that will can only occur if the fiscal plans respect the lawful priorities as well as liens of debt holders,” he said.

A sentiment echoed by Assured Guaranty, which has approximately $853 million of net par exposure to PREPA’s debt as of Sept. 30, 2017.

The insurer issued a strongly worded statement on Tuesday night that will urged any potential privatization partners or investors to look at if the Commonwealth’s plan adheres to the laws set by PROMESA as well as the U.S. Constitution.

“The system cannot be sold free as well as clear of the lien on revenues unless the lien is usually discharged through full payment of the bonds, there is usually adequate coverage of debt service after any sale of assets, or the bonds are given the full value of their collateral through a confirmed plan of adjustment,” the insurer said from the statement.

PREPA’s bonds are secured by a lien on the electric utility system revenues, as well as are further supported by covenants as well as Puerto Rico law that will ensure the electricity rates are sufficient to cover all costs including debt service.

The plan to privatize also sparked concerns having a separate group of PREPA creditors which hold around $3.3 billion of PREPA’s bonds.

“We believe the only path for any proposal to deliver low cost as well as reliable power will be if the idea respects property rights, since failure to do so will result in years of litigation by multiple parties,” a written statement issued on Monday by the Ad Hoc Group of Bondholders said. The group includes hedge funds BlueMountain Capital as well as Marathon Asset Management, as well as mutual funds OppenheimerFunds as well as Franklin Advisers.

The federally appointed Oversight Board confirmed receipt of the Fiscal Plans for the Commonwealth, PREPA as well as also for PRASA, the aqueduct as well as sewer authority.

“The Oversight Board views implementing structural reforms as well as investing in critical infrastructure as key to restoring economic growth as well as increasing confidence of residents as well as businesses,” said Natalie Jaresko, Executive Director of the Oversight Board in a statement issued Thursday.

The Oversight Board is usually holding a listening session to receive testimony by experts as well as stakeholders on the future of Puerto Rico’s energy sector next Thursday in completely new York. The Board also intends to proceed with its evaluation of the three fiscal plans as well as hopes to certify them by February 23rd.

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