Bonds

Consortium chosen to run PREPA generation, but approvals still needed

The Puerto Rico Electric Power Authority approved a contract Thursday with a consortium to run its electric generating facilities, despite observers raising some concerns about one member of the group.

The consortium, Genera PR, would include New Fortress Energy, the El Nuevo Día and El Vocero web sites reported. New Fortress is a liquified natural gas company, which, among other things, builds LNG import facilities.

Puerto Rico’s Public Private Partnerships Authority approved the contract last weekend, but the deal still needs approval from Gov. Pedro Pierluisi and the Puerto Rico Oversight Board.

PREPA and Puerto Rico’s government are nearing approving a deal to take over the authority’s electrical generating facilities.

“As long as [New Fortress Energy] continues supporting natural gas infrastructure [PREPA] will fail to balance their budget,” said Tom Sanzillo, Institute for Energy Economics and Finance finance director. “A balanced budget is essential to sustain debt at any level.”

New Fortress has no energy generation experience, according to Puerto Rico Attorney John Mudd. PREPA said New Fortress owes PREPA $34.5 million, which would be a conflict of interest, he said.

“New Fortress has a massive potential conflict of interest because if they get the [generation] privatization contract they will control the speed with which solar projects are integrated into the electrical system and how much federal and PREPA funds are spent converting existing generation facilities to natural gas,” said Cate Long, Puerto Rico Clearinghouse principal. “New Fortress has contract rights to supply natural gas to PREPA at [above the market rate.] So, by using PREPA and federal funds to convert existing oil burning generators and slow walking solar integration they stand to make massive profits.”

While the Puerto Rico Oversight Board has little to do with the selection of a company to operate PREPA generation, Oversight Board Member Justin Peterson said, “I’m in favor of the privatization of PREPA.”

New Fortress did not respond to a request for comment.

“The approval process for the operation and management of PREPA’s legacy generation assets project remains ongoing,” said Fermín Fontanés, executive director of the Puerto Rico Public-Private Partnerships Authority (P3A). “As stated in other forums, in accordance with the Public-Private Partnership Authority Act (Act No. 29-2009), information related to this public-private partnership is subject to confidentiality. Upon completion of the approval process, the P3A will make the information publicly available, including the name of the selected proponent.” 

The privatization of the authority’s generation facilities would follow the privatization of its transmission and distribution system, which LUMA Energy took over in June 2021.

The Oversight Board is currently in litigation against a group of major PREPA bondholders in an adversary proceeding in the PREPA bankruptcy and may also be in mediated talks with the bondholders but, since these are supposed to be private, they cannot be confirmed.

“I believe the board walking away from the table [in September] was a mistake,” Peterson said. “Unfortunately, ideology prevailed … A consensual deal that would end bankruptcy and be fair to bondholders was and still is achievable.”

On Jan. 13, bankruptcy Judge Laura Taylor Swain announced a Feb. 1 hearing date on the board’s summary judgment motion to dismiss the bondholders’ claims in the adversary proceeding.

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