A U.S. Commonwealth Shortchanged in Its Utility Company’s Debt-Restructuring Deal
We’ve published a report today that shows how Puerto Rico is at risk of missing an important opportunity in its energy-development history and an important opportunity at a fair restructuring of the debt of its public power company.
It’s the first independent assessment of a proposed deal between the Puerto Rico Power Authority (PREPA) and its creditors.
Our report shows how PREPA is on a dangerous path and, in the public interest, how it should get off that path and follow a better one.ment path avoid making the island overly reliant on natural gas
The report has two parts. The first addresses the island’s energy-development policy. The second speaks to the proposed restructuring of PREPA’s debt.
The energy section of our report makes the following recommendations:
- That Puerto Rico pursue a clean energy transformation from its current over-reliance on expensive and outdated oil-fired power plants.
- That the commonwealth’s energy-investment path avoid making the island overly reliant on natural gas.
- That PREPA develop an integrated resource plan that includes a scenario prioritiz
ing investment in wind, solar and energy efficiency before deciding to invest billions of dollars in a natural gas-powered future.
The financial section of our report makes the following recommendations:
- That PREPA make additional efforts in the coming weeks to secure deeper principal reductions from bondholders, particularly large institutional investors, hedge funds, and insurance companies.
- That PREPA acknowledge the proposed 85 percent principal recover is too generous to bondholders and will undermine PREPA’s efforts at long-term financial reform and frustrate investment in new energy resources.
- That whatever debt improvements PREPA ultimately makes be used to make room for prudent investments in solar energy, wind energy, and energy-efficiency programs.
- That the final deal include plans to reduce PREPA’s high electric rates.
It’s a time of great difficulty for PREPA. And a time of great opportunity.
Tom Sanzillo is IEEFA’s director of finance. Cathy Kunkel is a research fellow at IEEFA.
