Puerto Rico set to privatize electric utility

Puerto Rico Electric Power Authority employees fix power lines in Santurce San Juan Puerto Rico on Thursday Oct. 19 2017

Puerto Rico Electric Power Authority employees fix power lines in Santurce San Juan Puerto Rico on Thursday Oct. 19 2017

Ricardo Rossello announced plans Monday to privatize the island's troubled electric utility.

Power bills on the island have always been double the average of those on the US mainland, in part because imported fuel supplies three-fourths of the energy consumed in Puerto Rico, according to the US Energy Information Administration. The island's power generation system is 28 years older than the standard infrastructure used in the rest of the USA, he continued, and the antiquated system in place has been poorly serviced.

The company also has always been criticized for political patronage and inefficiency, and recently faced accusations of corruption. It filed the largest municipal bankruptcy in USA history last May. Authorities say the charge was then passed on to consumers.

Since its inception in 2014, SEPA's 51st State Initiative has provided an open platform for envisioning the future of the USA energy system. "Over the next few days the process will start, through which PREPA assets will be sold to companies who will transform the generation system into a modern, efficient, and less expensive one for the people", he said.

"It's a complicated arrangement: What's going to happen to the workers?"

The U.S. Army Corps of Engineers has said it may be May 31 before electricity is fully restored in Puerto Rico.

"We have to open up all these utilities that are bankrupt, failed", Velez said.

PREPA has been hampered by years of under-investment, frequent turnover in management and inefficient collections that forced it to go deeply into debt. The transaction will still need the approval of a federal oversight board and a federal judge because PREPA is in bankruptcy.

Senate President Thomas Rivera Schatz said he would look to pass legislation to protect the jobs of current PREPA employees in the event of a sale.

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Sen Juan Dalmau, whose party supports independence for Puerto Rico, said privatisation would not necessarily translate into efficiency or savings.

"One of the main pillars of the fiscal plan is that we achieve structural balance by fiscal 2022", Rossello said.

He added that the improved infrastructure will respond better to natural disasters.

The company also has faced internal turmoil. Its director left the utility last November. Instead, PREPA granted a power-restoration contract to a little-known company that the utility later scrapped.

The new five-year plan will take into account the cost of rebuilding the island and restoring an economy that's been in decline for more than a decade.

"One of the key considerations that Gov. Rossello neglected to mention in his announcement was that PREPA's bondholders - as well as municipal bond insurers MBIA and Assured Guaranty - have a permanent contractual lien on the utility's net revenues", said Mark Palmer, an analyst at BTIG, in a research note issued late on Monday.

"The Puerto Rico Electric Power Authority will cease to exist as it deficiently operates today".

Gov. Rossello gave an overview of how he envisions the 18-month privatization process would work.

"The privatization of PREPA will put the economic development of the country in private hands".

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