Latin America Advisor
Energy Advisor
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Will a Debt Plan Strengthen Puerto Rico’s Power Firm?
A federal court is seeking to resolve the Puerto Rico Electric Power Authority’s debt, much of which stems from the destruction of Hurricane Maria in 2017, which downed power lines and knocked out the island’s electric grid. // File Photo: U.S. Government Accountability Office.
A federal court hearing to resolve the Puerto Rico Electric Power Authority’s $9 billion debt began March 4 in San Juan. A congressionally appointed federal control board composed the current debt-restructuring plan, but a majority of creditors oppose the proposal. Protests also surrounded the courthouse hearing, as demonstrators decried the expected jump in the island’s electricity bills, which are already the highest anywhere in the United States. What are the strengths and weaknesses of the current debt-restructuring plan? Why do so many creditors oppose it, and what would be needed to responsibly resolve the issue? Is the current hearing likely to be successful in restructuring the power company’s debt, and, if so, how will it affect the lives of Puerto Ricans and the territory’s power sector?
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Cate Long, partner at the Puerto Rico Clearinghouse: “The bondholders of the Puerto Rico electric utility, Prepa, first extended liquidity to the agency in 2014 when they encountered cash flow problems. The bondholders then negotiated a series of restructuring support agreements (with an 84 percent recovery), and Congress grandfathered the last of those into Promesa, the federal law that provides a framework to adjust debts. The federally appointed oversight board threw out that negotiated agreement over the protest of Congress and instead commenced litigating in 2017 prior to Hurricane Maria. Bondholders began petitioning the court for authority to appoint a receiver, which is their right in…”
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A sister publication of the Inter-American Dialogue’s daily Latin America Advisor, the weekly Energy Advisor captures fresh analysis from business leaders and government officials on the most important developments in oil and gas, biofuels, the power sector, renewables, new technologies, and the policy debates shaping the future of energy in the Western Hemisphere and beyond. To subscribe or for more information, contact Gene Kuleta, editor of the Advisor, at gkuleta@thedialogue.org.
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