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A U.S. Commonwealth Shortchanged in Its Utility Company’s Debt-Restructuring Deal

September 10, 2015
Tom Sanzillo and Cathy Kunkel

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  • That Puerto Rico pursue a clean energy transformation from its current over-reliance on expensive and outdated oil-fired power plants.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.


Tom Sanzillo

Tom Sanzillo is Director of Financial Analysis for IEEFA. He has produced influential studies on the oil, gas, petrochemical and coal sectors in the U.S. and internationally, including company and credit analyses, facility development, oil and gas reserves, stock and commodity market analysis, and public and private financial structures. He also examines such areas as community and shareholder activism, institutional investment, public subsidies and Puerto Rico’s energy economics.

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Cathy Kunkel

Cathy Kunkel is an Energy Consultant at IEEFA.

Cathy also served as an IEEFA Energy Finance Analyst for 7 years, researching Appalachian natural gas pipelines and drilling; electric utility mergers, rates and resource planning; energy efficiency; and Puerto Rico’s electrical system. She has degrees in physics from Princeton and Cambridge.

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